New GST regime will be consumer-centric, says Centre
The new two-tier Goods and Services Tax (GST) structure of 18% and 5% rates will have the twin objective of making rates and processes simpler and more rational, as it was originally intended to be, the sources said.
'More equitable taxation'
'This has been in the making for a while. Our learning from the last eight years is going into this, and this will be a fundamental change in the template of taxation,' one senior functionary said. 'The new GST regime will make our taxation more equitable, and will see reduced taxes on what these four categories consume. The template will be more from the consumers point of view, and it will be put to and explained to the States from the consumers point of view.'
The Centre expects any reduction in revenues that this may cause to be soon offset by a new buoyancy in the economy expected from rate rationalisation and process simplification. 'Reduced rates will not lead to reduced revenues, and we expect compliance and collection going higher,' an official said, adding that the forthcoming tax regime will be 'fiscally sustainable'.
Most of the items in the 28% rate of GST will move to 18% and 'a few' will go to 40%, which will apply to exceptional items, termed 'sin goods', sources said.
'Revenues may fall in the very short run but we expect change in consumption and ease of compliance to make up for it. Thus, it will be a fairly fiscally sustainable exercise,' said a source.
Deepavali deadline
The Centre expects the States to be on board with the proposals in time for the Deepavali — October 20 — deadline it has set for itself to set them in motion. In a press release following the PM's speech, the Ministry of Finance said the Centre would be engaging with the State governments in the subsequent weeks, in the run-up to the next GST Council meeting.
Two Groups of Ministers (comprising representatives of the State governments) — one on rate rationalisation and another on compensation cess — will have to approve the details before they go to the GST Council for approval. GST has been an ongoing topic of conflict between Opposition-ruled States and the Centre, but the latter does not expect resistance to its revamp proposals.
'The concerns regarding any potential revenue losses are not theirs (Opposition-ruled States) alone to tackle. The Centre and the States should all work together to expand the revenues, using this opportunity. I do not think anyone will or can oppose the proposed reduction in rates,' the functionary said.
They also added that, since the Centre does not have any representative in the GoM on rate rationalisation, if the GoMs decide against the Centre's proposal, it would look like the States are deciding against lowering taxes for the common man.
Both GoMs, followed by the GST Council, are expected to meet in the coming weeks. One source said the compensation cess will soon cease, before its legal end-date of March 31, 2026. While it was originally set to cease in 2022, its duration was extended thereafter to repay the loan taken to compensate States as the cess collections themselves had been hit by the COVID-19 pandemic.
That loan will be repaid before time. However, this also creates a problem for the Centre as the cess also applies on sin goods like tobacco.
'If the cess ends, then this would substantially lower the effective rate of tax on tobacco, gutka, and other sin goods,' the source explained. 'And this is something the Centre cannot be doing. So, this was yet another reason why the GST revamp needed to be done soon.'
That the GST reforms are happening amid global uncertainties and tariff threats by the United States is mere coincidence, according to the sources.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hindustan Times
28 minutes ago
- Hindustan Times
In report to Sikkim CM, panel recommends tribal status to 12 communities
Gangtok, A high-level committee on Monday submitted the final ethnographic report to Sikkim Chief Minister Prem Singh Tamang, recommending that 12 ethnic communities be granted tribal status. In report to Sikkim CM, panel recommends tribal status to 12 communities The 12-member Sikkim State High-Level Committee was formed last year to conduct a study and make recommendations to the Centre for the inclusion of 12 communities in the list of Scheduled Tribes . "Today marks a truly historic moment for Sikkim and for our people, as the SSHLC formally submitted the final ethnographic reports during the valedictory function held in New Delhi," Tamang said in a social media post. The comprehensive report has recommended inclusion of 12 left-out ethnic Sikkimese communities into the list of Scheduled Tribes under the Constitution, he said. "Our government has always stood firm in its resolve to secure Scheduled Tribe status for the 12 left-out ethnic communities of Sikkim," Tamang said. The committee did a rigorous, research-based work over the past nine months, which has resulted in one of the most comprehensive ethnographic studies ever prepared for Sikkim, the chief minister said. 'The reports, compiled in four detailed volumes, not only addressed the data gaps but also provided practical, evidence-based recommendations that strengthen our collective case for constitutional recognition,' he said. The chief minister thanked SSHLC Chairman BV Sharma who is the Anthropological Survey of India Director, and Vice Chairman Prof Mahendra P Lama, a JNU professor, besides its members and representatives of 12 ethnic communities for their hard work which helped shape the report. Tamang said that his government will forward the report to the Centre and ensure that these 12 communities of Sikkim are included in the ST list. The communities concerned are Bhujel, Gurung, Jogi, Rai , Kirat Dewan , Khas , Mangar, Newar, Sanyasi, Sunuwar , Thami and Majhi. This article was generated from an automated news agency feed without modifications to text.
The Hindu
28 minutes ago
- The Hindu
Pakistani university lecturer arrested for planning foiled Balochistan attack, officials say
Security forces in southwestern Pakistan arrested a university lecturer accused of planning a foiled suicide attack that would have targeted last week's Independence Day celebrations in insurgency-hit Balochistan province, officials said Monday (August 18, 2025). The suspect, Usman Qazi, is claimed to have links with the outlawed Majeed Brigade, the suicide squad of the Balochistan Liberation Army, according to the province's Chief Minister, Sarfraz Bugti. During a press conference in the city of Quetta, Mr. Bugti showed video footage with Qazi admitting to planning the thwarted attack as well as aiding militants in recent years. It was unclear whether Qazi made those remarks under duress. Mr. Bugti did not clarify when the arrest was made, and only said the man was still being questioned. The arrest comes a week after the US State Department designated BLA and the Majeed Brigade a foreign terrorist organisation. The group is already banned at home. Mr. Bugti said it was the first time security forces acting on intelligence had captured a senior member of the Majeed Brigade. He said Qazi confessed to involvement in past attacks, including last year's railway station bombing in Quetta that killed 32 people. There was no immediate comment from the BLA about the arrest. Balochistan has long seen violence blamed on separatist groups, including the BLA. The province is rich in natural resources and home to projects tied to the multibillion-dollar China-Pakistan Economic Corridor, where Chinese nationals and Pakistani security forces have also been targeted by insurgents. The separatists demand independence from Pakistan's central government in Islamabad. Though the government said it had quelled the insurgency, violence persists there.
Mint
28 minutes ago
- Mint
Modi meets key ministers, economists to discuss 100-day reform agenda
New Delhi: Prime Minister Narendra Modi on Monday huddled with senior ministers, top bureaucrats and economists to draw up a 100-day roadmap for 'next-generation reforms' aimed at sustaining India's growth momentum and insulating the economy from fresh US tariffs on exports, three persons familiar with the development said on condition of not being named. The meeting was attended by home minister Amit Shah, finance minister Nirmala Sitharaman, commerce and industry minister Piyush Goyal, Railways minister Ashwini Vaishnaw, secretaries of key departments, and select economists. 'Chaired a meeting to discuss the roadmap for next-generation reforms. We are committed to speedy reforms across all sectors, which will boost ease of living, ease of doing business and prosperity,' the Prime Minister said in a social media post. Individual ministries have been urged to come up with tailored measures towards the 100-day agenda to accelerate India's economic growth, one of the persons quoted above said. Another issue that was deliberated was the impact of tariffs that the US has imposed on Indian exports, said the second person. Notably, the 25% reciprocal tariffs on Indian exports that US President Donald Trump imposed came into effect on 7 August. This may double to 50% on 27 August after additional tariffs imposed for New Delhi's oil trade with Russia kick in. Given that such high tariffs could impact Indian exporters' competitiveness in their largest export market, policy makers are keen to step up domestic consumption demand and, thus, capacity utilisation in factories, which will ensure jobs are protected. Modi had highlighted the need for faster economic growth in his Independence Day speech on Friday. 'We want to grow fast,' Modi said in his speech while announcing that a task force will give recommendations in this regard. Current law, practices, procedures, etc, should be aligned to the 21st century and the global environment, and should aid India in becoming a developed country by 2047, Modi had said in his address. The theme of stimulating the economy through reforms was already in motion early this financial year as Sitharaman presented a reform-focused budget in February with big cuts in income tax, welfare targets for inclusive growth, and across-the-board reforms especially in regulatory framework, taxation and the financial sector. Policy makers believe cutting red tape and making it easier to do business can unleash the entrepreneurial spirit of people, which can help to achieve much more than what the government and state-run firms can do directly, the people cited above said. While agriculture and services are performing well, the government wants to increase the share of manufacturing in the economy, which can fetch more and better paid jobs to people. The Centre has also launched several schemes to address the skill gap among the youth that affect their employability. India's GDP is projected by the Reserve Bank of India (RBI) to grow at 6.5% this financial year. Above normal monsoons, the income tax relief announced in the budget, and a 100-basis points reduction in RBI's repo rate are also expected to support growth this year. On 14 August, Mint reported that the government has asked 37 ministries to submit a detailed report on the key compliance requirements that are creating roadblocks for manufacturers, exporters, investors and small enterprises, and hurting their ability to conduct their businesses smoothly. Subhash Narayan contributed to this story
