Central government proposed major changes in GST, 40% tax will be levied on expensive hobbies

New Delhi: The Central government has proposed major changes in the GST system. According to government sources, the new structure will have two main rates of GST, five percent and 18 percent. Apart from this, a special tax of 40 percent will be levied on luxury and harmful items (such as alcohol, tobacco etc.). According to sources – about 99 percent of the items coming in the current 12 percent GST slab will now go to the five percent slab. At the same time, about 90 percent of the items coming in the 28 percent slab will now come in the 18 percent slab. The government believes that this change will simplify the tax structure and provide relief to consumers.

According to sources, the government hopes that the major changes in the GST structure will increase people’s consumption (purchasing and use), which will compensate for the revenue loss due to reduction in tax rates. According to government sources, now only 5 percent GST will be levied on everyday items and goods used by the common man. In the new system, 40 percent GST will be levied on tobacco products, but the total burden of tax will remain at the current level i.e. 88 percent. At the same time, petroleum products will still not be brought under the purview of GST and a separate tax will be levied on them as before.

Prime Minister Narendra Modi has announced on the occasion of his 79th Independence Day that GST reforms will be implemented by Diwali. This will reduce the tax burden significantly and small industries will benefit. Soon after the announcement, the Finance Ministry said that the Center’s proposal shared with the Group of Ministers is based on three pillars – structural reforms, rationalization of rates and ease of living. The proposal includes reduction in taxes on common man’s goods and aspirational goods.

Prime Minister Narendra Modi on Friday announced the formation of a task force for ‘next generation reforms’ and amendments to GST laws. He focused a large part of his 103-minute speech on Independence Day on making India self-reliant in many sectors from semiconductors to fertilizers. These announcements are important in view of the current geopolitical scenario and the high tariffs imposed by the US on Indian goods.