PM Modi’s Diwali Gift: GST Revamp, Here is what you should know about it
This is going to be big news and an even bigger relief for everyone in India. While delivering his Independence Day speech, Prime Minister Narendra Modi gave a gift to all the taxpayers.
The Indian government is making a foolproof plan to be rolled out around Diwali as the next big GST reform. This is said to be replacing the confusing multiple tax slabs with just two simple ones!
The change aims at lightening the burden and tax load, especially for small businesses and everyday consumers, just like you and me. This GST reform will contribute to a more efficient tax system.
“This Diwali, I am going to make it a double Diwali for you…we have undertaken a big reform of GST over the last eight years. We reduced the burden of tax across the country…eight years later, time demands that we review it. We started the review through the formation of a high-powered committee, held discussions with states,” PM Modi said. “We are coming with next generation GST reforms by this Diwali,” he said, adding that tax burden will be reduced significantly, and MSMEs will benefit greatly.
This will be the most important highlight of PM Modi’s speech, upcoming changes to GST!
Here is how it could effect you
The central government is working on simplifying the tax system by introducing just two main tax rates. Which will be a standard rate and a merit rate.
This plan, called rate rationalisation, means fewer slabs and a clearer system. The Finance Ministry has already sent this proposal to a special panel of ministers who are reviewing it.
What does this mean for you?
Well, only a few select items will have special rates, making things simpler and fairer for most people and businesses. The government says the upcoming GST reforms will focus on three main goals: structural reforms to fix the system, rate rationalisation to simplify tax slabs, and ease of living to make things easier for everyone.
As the Finance Ministry put it, “The Central Government has sent its proposal on GST rate rationalisation and reforms to the Group of Ministers (GoM) constituted by the GST Council to examine this issue.” So, stay tuned, these changes could make your taxes and shopping smoother.
According to Finance Ministry the government is planning to lower taxes on everyday items and aspirational products that people hope to own. The idea is to make these goods more affordable and within reach for more citizens. As the Ministry stated, “This would enhance affordability, boost consumption, and make essential and aspirational goods more accessible to a wider population.”
The Finance Ministry Posted on the social media platform, a detailed highlights of the GST Reform. “Key areas identified for next-generation reforms include the rationalisation of tax rates to benefit all sections of society, especially the common man, women, students, middle class, and farmers.” It also Added “Reforms will also seek to reduce classification-related disputes, correcting inverted duty structures in specific sectors, ensuring greater rate stability, and further enhancing ease of doing business. These measures would strengthen key economic sectors, stimulate economic activity, and enable sectoral expansion.”
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
Let me help you break it down. So, Earlier, the government’s special GST panel (GoM) looked at changing tax rates for about 150 items, And this list included everyday services and essentials like:
Some of these were expected to get cheaper, while others like like luxury goods were in line for a hike.
But now, the Indian Government is planning something much bigger. The government is aiming for a complete revamp, restructuring and reworking tax rates for as many as 1,300 items that come under GST.
Here’s a quick reminder of the current GST setup:
India has five tax slabs:
This will become simpler taxes and less hidden pays for you. Afer the GST reform you will see lower prices on essentials and more clarity at billing counters. Whether it’s your favourite juice bottle, a new bicycle, or your insurance premium, things could become more predictable and possibly lighter on the pocket.
(With Inputs From Ministry)
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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