There will be only 2 slabs in GST, goods will be cheaper, a big proposal from the Finance Ministry
Prime Minister Narendra Modi, while addressing the nation from the Red Fort on the occasion of the 78th Independence Day on Friday, promised next-generation GST (Goods and Services Tax) reforms ahead of Diwali, calling it a major gift to the people during the festive season.
The government will “constitute a task force for next-generation reforms”. This task force, the PM said, will work towards aligning existing laws with India’s needs and preparing the nation to become ‘Viksit Bharat by 2047’.
Introduced in 2017, the GST reform was touted as a historic milestone to strengthen the country’s economy. Now, the government is preparing to roll out the next generation of GST reforms to accelerate the vision of an ‘Atmanirbhar Bharat’.
The focus of these reforms will be on three major pillars – structural reforms, rate rationalization and ease of living, the Finance Ministry said in a statement.
Key pillars of the Centre’s proposed reforms
Pillar 1: Structural reforms
Inverted duty structure correction: The correction of inverted duty structures to align input and output tax rates so that there is a reduction in the accumulation of input tax credit. This would support domestic value addition.
Resolving classification issues: Resolve classification issues to streamline rate structures, minimise disputes, simplify compliance processes, and ensure greater equity and consistency across sectors.
Stability and predictability: Provide long-term clarity on rates and policy direction to build industry confidence and support better business planning.
Pillar 2: Rate rationalisation
Reduction of taxes on common-man items and aspirational goods: This would enhance affordability, boost consumption, and make essential and aspirational goods more accessible to a wider population.
Reduction of slabs: Essentially move towards simple tax with 2 slabs – standard and merit. Special rates only for select few items.
Compensation Cess: The end of compensation cess has created fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability.
Pillar 3: Ease of living
Registration: seamless, technology-driven, and time-bound, especially for small businesses and startups.
Return: Implement pre-filled returns, thus reducing manual intervention and eliminating mismatches.
Refund: faster and automated processing of refunds for exporters and those with inverted duty structure.
Centre sends proposals to GoM
The central government has sent these proposals to the Group of Ministers (GoM) of the GST Council. Efforts will be made to implement these reforms soon by building a consensus with the states, so that the public can get its benefits in this financial year itself.
The government aims to transform GST into a simple, stable and transparent tax system that will promote inclusive growth, strengthen the formal economy and enhance ‘Ease of Doing Business’.