The Group of Ministers (GoM) of the states constituted to restructure the rates of Goods and Services Tax (GST) approved two new proposals of the Central Government on Thursday.
Under these proposals, the existing four-slab structure will be changed to two slabs – 5% and 18%. Also, a decision has been taken to abolish the 12% and 28% tax slabs. Bihar Deputy Chief Minister and Convenor of the Rate Restructuring Group Samrat Chaudhary said after the meeting that both the proposals of the Central Government have been accepted by the Group of Ministers constituted on rate restructuring.
40% GST on luxury and ‘sin goods’
Uttar Pradesh Finance Minister Suresh Kumar Khanna said that the central government has proposed to impose 40% GST on ultra-luxury items and ‘sin goods’ (such as alcohol, cigarettes, luxury cars etc). To this, West Bengal Finance Minister Chandrima Bhattacharya suggested that an additional cess (levy) be imposed on top of the 40% tax, so that the current tax burden (28% + cess) on these items remains. Bhattacharya also expressed concern that the Centre’s proposal did not state how much revenue the governments would lose after the new rates are implemented.
Current GST rates
There are currently four main GST tax slabs applicable in India: 5%, 12%, 18% and 28%. Items of everyday need are usually taxed at 0% or 5%. Luxury items and ‘sin goods’ are taxed at 28% + cess at varying rates.
What will be the further process?
These recommendations of the GoM will now be sent to the GST Council. These changes will be implemented only after the approval of the Council. If approved, it will be considered the biggest reform in the GST system so far. This step is considered important in the direction of making the tax system more simple and transparent, which can benefit both businessmen and consumers.
