GST framework overhaul set to make consumers smile
Following up on Prime Minister Narendra Modi’s Independence Day speech, the ball has got rolling towards an overhaul of the Goods and Services Tax (GST) framework. The rationalisation and reduction of the number of tax brackets and cutting down of prices of daily-use items, in fact, comes a relief to consumers across the board.
Significant about the overhauling process is the fact that tax on 90 per cent of goods which are attracting 28 per cent GST would see a cut, and these items would fall into the reduced 18 percent bracket. Daily-use goods that currently attract 12 percent tax will also see levies drop to five percent. This would pull down the prices of these items, much to the relief of consumers across the nation.
Passenger cars, bikes, daily items to get cheaper
Car enthusiasts are set to gain much with the new overhaul, as the government is expected to soon announce a cut in taxes of passenger cars. Two-wheelers will also benefit from this lowering of taxes. In the current scenario, a GST of 28 percent plus a compensation cess up to 22 percent is levied on passenger cars. The levies are based on engine capacity, length of the vehicle, and body type. Further, electric vehicles get charged with five percent tax and zero compensation cess. Meanwhile, mid-sized and luxury passenger vehicles attract between 40 and 50 per cent tax currently.
When it comes to two-wheelers, tax levied comes to 28 per cent. In this category, however, compensation cess is zero for models with an engine capacity up to 350cc. Those two-wheelers that have an engine capacity upwards of 350cc attracts 3 per cent cess.
When the new overhaul of the taxes framework comes about, the 28 per cent category is bound to go. This also means that passenger cars and bikes will come under the new 18 per cent bracket. Prices of these vehicles will then become 10 per cent cheaper.
Govt mulls Sin Tax on certain items
The government would also look at slapping a sin tax amounting to 40 percent on certain goods, and the list would obviously include tobacco products. Currently, tobacco attracts a 160 per cent cess, while cigarettes are levied GST, cess and National Calamity Contingent Duty.
These apart, petroleum products will be made to stay outside the GST purview. Meanwhile, the current GST rates would continue on diamonds and precious stones, and other goods made by labour-intensive and export-oriented industries.
We will have to wait for the announcements in this regard to come about after the GST Council meeting, expected to get underway in a few days from now, in September.
