Govt proposes 5% and 18% GST slabs, tobacco & pan masala at 40%: Reports
The Goods and Services Tax (GST) has been a crucial component of India’s indirect tax structure since its implementation in 2017. However, the government has been considering an overhaul of the GST structure to make it more efficient and effective. According to recent reports, the government has proposed a significant change to the GST structure, recommending two tax slabs of 5% and 18%. Additionally, sin goods like tobacco and pan masala will face a 40% GST.
The proposal has been reported to have been sent to the Goods and Services Tax Council, which is the apex body responsible for making decisions on GST-related matters. The council is a joint forum of the Centre and states, and any changes to the GST structure require the approval of at least two-thirds of the members.
The proposed 5% GST slab is expected to cover essential goods and services, such as food, healthcare, and education. This move is likely to benefit consumers, as it will reduce the overall tax burden on these essential items. On the other hand, the 18% GST slab is expected to cover discretionary goods and services, such as luxury items and entertainment.
The 40% GST slab for sin goods like tobacco and pan masala is aimed at reducing their consumption and promoting a healthier lifestyle. Tobacco and pan masala are considered harmful to public health, and the government has been taking steps to reduce their consumption. The higher GST rate is expected to increase the cost of these products, making them less affordable for consumers.
The proposal has been welcomed by many experts, who believe that it will simplify the GST structure and make it more efficient. “The proposed GST structure is a step in the right direction,” said Dr. Rakesh Nangia, a leading tax expert. “It will reduce the complexity of the current GST structure and make it more taxpayer-friendly.”
However, some experts have raised concerns about the impact of the proposed GST structure on the economy. “The proposed GST structure may lead to an increase in prices of goods and services,” said Dr. Nangia. “This could have a negative impact on the economy, particularly on small businesses and consumers.”
The proposal is expected to be discussed and finalized by the GST Council in the coming weeks. Once finalised, the new GST structure will come into effect, and businesses will need to adjust their pricing and tax strategies accordingly.
Rationale behind the proposal
The government has proposed the new GST structure after conducting a comprehensive review of the current GST regime. The review was conducted to identify areas of improvement and to make the GST structure more effective.
The government has cited several reasons for proposing the new GST structure. One of the main reasons is to simplify the GST structure and make it more taxpayer-friendly. The current GST structure has multiple tax slabs, which can be confusing for taxpayers. The proposed GST structure will reduce the number of tax slabs, making it easier for taxpayers to comply with GST requirements.
Another reason for the proposal is to reduce the tax burden on essential goods and services. The government has identified essential goods and services, such as food, healthcare, and education, which are critical to the well-being of citizens. The proposed GST structure will reduce the tax burden on these essential goods and services, making them more affordable for consumers.
Impact on businesses
The proposed GST structure is expected to have a significant impact on businesses, particularly small and medium-sized enterprises (SMEs). SMEs are likely to benefit from the reduced tax burden on essential goods and services, which will increase their competitiveness and profitability.
However, the proposed GST structure may also have some challenges for businesses. For example, the 40% GST slab for sin goods like tobacco and pan masala will increase the cost of these products for businesses. This may lead to a reduction in the demand for these products, which could have a negative impact on businesses that rely on them.
Conclusion
The government’s proposal to overhaul the GST structure is a significant development in the tax landscape of India. The proposed 5% and 18% GST slabs, along with the 40% GST slab for sin goods like tobacco and pan masala, are expected to simplify the GST structure and make it more taxpayer-friendly.
While the proposal has been welcomed by many experts, it also has its challenges. The government will need to carefully consider the impact of the proposed GST structure on businesses, particularly SMEs, and take steps to mitigate any negative consequences.
As the proposal is expected to be discussed and finalized by the GST Council in the coming weeks, businesses and taxpayers will need to stay vigilant and adapt to the changing GST landscape.
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