GST: More reforms needed

On 15 August, in his address from the ramparts of the Red Fort, Prime Minister Narendra Modi declared the launch of next-generation (Goods and Services Tax) GST reforms as a Diwali gift for citizens.

- Santosh Kumar Mohapatra

On August 21, the sixmember Group of Ministers (GoM) accepted the Centre’s plan on GST rate rationalisation~ to reduce the number of tax slabs. They have proposed replacing the current four rates of 5, 12, 18 and 28 per cent with just two main slabs— “merit” goods and services will attract 5 per cent GST, while most other items (standard) will come under an 18 per cent standard rate.

A higher 40 per cent levy will remain on a small set of so-called luxury, high-end items, such as SUVs and “sin” goods such as alcohol, tobacco, drugs, gambling, soft drinks, fast food, coffee, sugar, and even pornography. There will be no cess with elimination of 28 per cent slab. Most items will move from the 12 per cent to the 5 per cent rate and most from the 28 percent to the 18 per cent rate, significantly simplifying the structure. The 18 per cent slab will be the dominant one since 64 per cent of the revenue was coming from this slab earlier, it will increase further. The GST Council is expected to meet on September 3-4 to finalise the details and the same is likely to be implemented on September 22.