Are Upcoming GST Reforms Timely and Much-Needed?
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Synopsis
Tax expert Ajay Rotti applauds the government's proposed GST reforms, which aim to simplify the tax structure into two main slabs of 5% and 18%. This move is expected to benefit consumers and enhance economic stability amidst global challenges. Discover the potential impact of these changes on everyday essentials.
Key Takeaways
- GST reforms aim to simplify tax structure.
- New slabs: 5% and 18%.
- Potential tax reduction for essential goods.
- Government support may be needed for affected sectors.
- Positive economic outlook despite global challenges.
New Delhi, Aug 16 (NationPress) Prominent tax authority Ajay Rotti expressed support on Saturday for the government's initiative to reform the Goods and Services Tax (GST) framework, primarily condensing it into two tax categories of 5 percent and 18 percent.
The Central Government is considering a shift from the existing four-slab system to two main rates—5 percent and 18 percent—while introducing a specialized 40 percent bracket for luxury and sin items.
Approximately 99 percent of items currently taxed at 12 percent are anticipated to transition to the 5 percent category, while 90 percent of goods under the 28 percent slab, including white goods, will likely move to 18 percent.
During a discussion with IANS, Rotti remarked that Prime Minister Narendra Modi’s remarks on GST reforms during Independence Day were timely and essential.
“When the GST was rolled out, it featured multiple rates: 5 percent, 12 percent, 18 percent, and 28 percent—to ensure a revenue-neutral rate as states were giving up VAT, octroi, and other taxes. This structure was not sustainable for the long term,” Rotti stated.
“The initial vision encompassed two primary rates, a lower one to promote specific goods and support smaller businesses, and a standard rate, with a higher rate exclusively for sin goods,” he added.
The anticipated new configuration will likely include two major slabs: 5 percent and 18 percent, in addition to a 40 percent rate for sin products. The 12 percent slab could merge with the 5 percent category, which may benefit the average consumer.
Essential goods such as packed nuts, packaged food, butter, umbrellas, and sewing machines might experience a tax reduction from 12 percent to 5 percent.
Rotti also lauded S&P’s favorable outlook on India's sovereign rating and its stable GDP growth forecast of 6.5 percent. “This demonstrates economic resilience despite global hurdles. The US tariffs have a negligible effect on India's economy, as exports from the US constitute a minor part of India's GDP,” he informed IANS.
The macroeconomic impact is minimal, though sectors like textiles and marine exports may face difficulties, requiring government intervention, Rotti noted.
Despite global challenges, India's macroeconomic stability, tax growth, and momentum remain robust, and the GST reforms coupled with steady growth forecasts signal positive trends for the economy, he emphasized.
Point of View
I believe these GST reforms represent a crucial step towards simplifying taxation in India. The government's approach addresses long-standing concerns about the complexity of the current system, aiming to enhance compliance and benefit the average citizen. The proposed changes are timely and could foster economic growth.
NationPress
05/10/2025
Frequently Asked Questions
What are the proposed GST slabs?
The new GST structure proposes two main slabs: 5% and 18%, with a special 40% rate for luxury and sin goods.
How will the reforms affect consumers?
The reforms are expected to lower taxes on essential goods, potentially reducing prices for the average consumer.
What is the expected impact on the economy?
Experts believe that these reforms will enhance economic stability and growth, especially in the face of global challenges.
