Govt proposes 5% and 18% GST slabs, tobacco & pan masala at 40%: Reports
The Indian government has proposed a significant overhaul of the Goods and Services Tax (GST) structure, recommending a dual tax slab system with rates of 5% and 18%, according to reports. The reports also indicate that sin goods such as tobacco and pan masala will be subject to a higher GST rate of 40%.
The proposal has been reportedly sent to the GST Council, which is expected to take a final decision on the matter. The government’s move is aimed at simplifying the GST system, which has been criticized for being overly complex and leading to compliance issues for businesses.
The existing GST structure has multiple tax slabs, including 0%, 5%, 12%, 18%, and 28%. The proposal to reduce the number of slabs to two – 5% and 18% – is intended to make it easier for businesses to understand and comply with the tax law.
The 5% slab is likely to be used for essential goods such as food grains, pulses, and other household items, while the 18% slab will be used for discretionary goods such as consumer durables and services. The 40% slab for sin goods like tobacco and pan masala is aimed at discouraging their consumption and reducing the financial burden on the government.
The proposal is also expected to reduce the number of exemptions and exceptions in the GST law, which have been a major source of controversy and disputes. By reducing the number of slabs and exemptions, the government hopes to simplify the GST system and reduce the compliance burden on businesses.
The move is also seen as a step towards reducing the overall GST rate, which has been a major issue for businesses. The current GST rate ranges from 5% to 28%, which can be complex and confusing for businesses to comply with. By reducing the number of slabs and rates, the government hopes to make it easier for businesses to understand and comply with the tax law.
The proposal has been welcomed by industry bodies, which have been urging the government to simplify the GST system. The Confederation of Indian Industry (CII) has said that the proposal is a step in the right direction and will help to simplify the GST system and reduce the compliance burden on businesses.
However, some experts have raised concerns about the impact of the proposal on certain sectors, such as the pharmaceutical industry. The industry has been relying on the current 12% GST rate, which is lower than the proposed 18% rate. If the proposal is implemented, it could lead to an increase in the cost of medicines and healthcare services.
The government has also been considering other changes to the GST law, including the introduction of an e-invoice system and the simplification of the return filing process. The government has also been exploring the possibility of introducing a GST refund system for exporters, which could help to boost exports and reduce the compliance burden on businesses.
In conclusion, the government’s proposal to introduce a dual GST slab system with rates of 5% and 18% is a significant step towards simplifying the GST system and reducing the compliance burden on businesses. While some experts have raised concerns about the impact of the proposal on certain sectors, the move is expected to have a positive impact on the overall economy and reduce the financial burden on the government.
