A key change in the indirect tax regime was announced by the Goods and Services Tax (GST) Council on Wednesday, with a simplified GST rate structure in two tiers. The new rates will be effective as of September 22.
This was decided upon following a marathon day-long Council meeting in Delhi, presided over by Union Finance Minister Nirmala Sitharaman. She added that the relocation is a big step towards making the tax system more reasonable and taxing the common man less. She says that that was unanimous, no state disagreed with the decisions made.
Within the new structure, the current 4 GST rates of 5, 12, 18, and 28 per cent are to be combined into two standard rates of 5 per cent and 18 per cent. This will ease the compliance burden on businesses as well as guaranteeing reduced taxes on basic commodities. Sitharaman pointed out that after a long process of reviewing items which are used in daily life, these reforms have been implemented, and the tax rates in most cases are lower.
Besides these two standard rates, a special slab of 40 per cent is proposed on a small number of luxury and sin goods such as luxury cars, tobacco, and cigarettes. This is an effort to offset the revenue needs without making necessities unaffordable.
According to Chandrima Bhattacharya, a finance minister in West Bengal and also present at the meeting, the new system might cost the government around [?]477 billion in revenue. But she also admitted that the simplified structure would favour the ordinary man and the simplified tax system.
In general, the relocation is an indication of a more efficient and streamlined GST system. The Council will also reduce the number of slabs in order to keep complexities to a minimum, enhance transparency and make the tax structure more business-friendly. Close attention will be paid to the implementation since September 22.
GST rates: Items under 0%
- 33 Life-saving drugs and medicines, Cancer medicines, Medication for rare diseases,
- Individual life insurance, Health policies
- Maps, Charts, Globes, Pencils, Sharpeners, Crayons, Pastels, Exercise Books, Notebooks, Erasers
- Ultra-High Temperature (UHT) milk, Chena or paneer, pre-packaged and labelled, Pizza bread, Khakhra, Chapathi or Roti
GST rates: Items under 5%
- Hair oil, Shampoo, Toothpaste, Toilet soap, Tooth brush, Shaving cream
- Butter, Ghee, Cheese & dairy spreads, Namkeens, Utensils
- Feeding bottles, napkins for babies and clinical diapers
- Sewing machines and parts-Thermometer, Medical grade oxygen, All diagnostic kits and reagents, Glucometer and test strip
- Corrective spectacles
- Tractor tyres, parts, tractors
- Specified bio-pesticides, Micro-Nutrients
- Drip irrigation system and sprinklers
- Agricultural, horticultural or forestry machines for soil preparation
GST rates: Items under 18%
- Petrol & Petrol Hybrid, LPG, CNG Cars (not exceeding 1200 cc & 4000 mm)
- Diesel & Diesel Hybrid Cars (not exceeding 1500 cc & 4000 mm)
- 3 Wheeled Vehicles
- Motorcycles (350 cc & below)
- Motor Vehicles for the transport of goods
- Air Conditioners
- Televisions (above 32″) including LED & LCD TVs
- Monitors & Projectors
- Dish Washing Machines
- Road tractors of engine capacity more than 1800 cc
GST rates: Items in 40%
- Pan masala, Cigarettes, Gutka, Chewing Tobacco, Bidis
- Aerated waters containing added sugar or flavour, Caffeinated beverages, Non-alcoholic beverages
- Smoking pipes
- Motorcycles exceeding 350 cc
- Aircraft for personal use
- Yachts
- Revolvers and pistols
- Betting, casinos, gambling, horse racing, lottery and online money gaming
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