Govt proposes 5% and 18% GST slabs, tobacco & pan masala at 40%: Reports
In a significant move to revamp the Indian taxation system, the government has reportedly proposed a two-tax slab structure for the Goods and Services Tax (GST). According to sources, the proposed slabs are 5% and 18%, which will replace the current four-slabs system of 5%, 12%, 18%, and 28%. Additionally, the government has recommended a 40% GST on sin goods such as tobacco and pan masala.
The proposal, which has been sent to the GST Council, aims to simplify the tax structure and reduce the compliance burden on taxpayers. The move is also expected to curb tax evasion and increase revenue for the government.
The current GST structure, which was introduced in 2017, has been criticized for being complex and prone to disputes. The four-slabs system has led to a plethora of tax rates, making it difficult for taxpayers to navigate the system. The proposed two-slabs structure is expected to simplify the tax system and reduce the number of tax rates.
The 5% GST slab is expected to be applicable to essential goods such as food grains, medicines, and household items. This slab is likely to benefit the common man as it will reduce the tax burden on these essential goods.
The 18% GST slab, on the other hand, is expected to be applicable to non-essential goods such as electronics, clothing, and furniture. This slab is likely to impact the consumption of these goods, as the increased tax burden may lead to higher prices.
The 40% GST slab, which is applicable to sin goods such as tobacco and pan masala, is expected to reduce their consumption. The government has been trying to reduce the consumption of these goods, which are considered harmful to health.
The proposal is expected to benefit the economy in several ways. Firstly, it will reduce the compliance burden on taxpayers, which will lead to increased compliance and reduced tax evasion. Secondly, it will simplify the tax system, making it easier for taxpayers to navigate. Thirdly, it will increase revenue for the government, which can be used to fund public welfare schemes.
However, the proposal has also raised concerns among some stakeholders. For example, the increase in tax rate on non-essential goods may lead to higher prices and reduced consumption. This may have a negative impact on the economy, particularly in the short term.
The proposal is also expected to have a significant impact on the textile industry, which is a significant contributor to India’s economy. The industry has been facing challenges due to high taxes and duties, and the proposed reduction in tax rate may provide some relief.
In conclusion, the government’s proposal to replace the current four-slabs GST structure with a two-slabs structure is a welcome move. The proposed slabs of 5% and 18% are expected to simplify the tax system, reduce the compliance burden on taxpayers, and increase revenue for the government. However, the proposal also raises concerns among some stakeholders, and its impact on the economy will depend on various factors.
