Double Diwali: Rejigged rates, red tape cuts to define GST 2.0

India's multiple-rate Goods and Services Tax (GST) regime is set for a massive reboot with the Centre proposing to scrap the 12 per cent and 28 per cent tax slabs, switch most items facing these levies to the existing slabs of 5 per cent and 18 per cent, and introduce a new 40 per cent peak levy for sin goods.

- ASIT RANJAN MISHRA & MONIKA YADAV

Coming close on the heels of the 50 per cent tariff threat on Indian goods announced by the US administration, the move to fix the eight-year-old indirect tax system is aimed at improving Indian producers' cost-competitiveness, and more importantly, spurring domestic consumption to shield the economy from mounting external uncertainties.

Prime Minister Narendra Modi announced this much-awaited GST rate rationalisation reform, which corporate India believes could alter the trajectory of uneven consumption demand trends, from the ramparts of the Red Fort in his Independence Day speech, stating: "This Diwali, I am going to make it a double Diwali for you," he said.

"We have discussed with states and we are bringing next-generation GST reforms that will reduce the tax burden across the country. Taxon items for the common man will be reduced substantially. Our MSMES [micro, small and medium enterprises], our small entrepreneurs, will get a huge benefit. Everyday items will become very cheap and that will also give a new boost to the economy," he said.

In a statement later in the day, the finance ministry said the Centre's proposal for reforms in the indirect tax hinges on three foundational pillarsstructural reforms, rate rationalisation and ease of living. The proposal, it said, has been shared with the GST Council's Group of Ministers (GOM) on rate rationalisation headed by Bihar deputy chief minister Samrat Choudhary for further deliberations.