New Delhi, 22 August (Kiran News). The central government is preparing for a major change in the Goods and Services Tax (GST) system. This time, a proposal for GST 2.0 reforms has been presented, which will soon be discussed by the committee of finance ministers of the states. The latest report from state-run bank SBI Research shows that even though the government may have to face a revenue loss of about Rs 85,000 crore due to these reforms, the country’s consumption will increase by about Rs 1.98 lakh crore in return.
Direct Benefit to Common People and the Market
According to SBI Research, the new tax rates will result in more savings for people, which will boost spending and bring fresh momentum to the economy. The report states that the tax cut will lower the prices of essential items like food and clothing. This could reduce Consumer Price Index-based inflation by 0.2 to 0.5 percent, and also have a positive effect on retail inflation.
New Tax Structure of GST 2.0
According to the proposal put forward by the Centre, there will now be only two rates – 5 percent and 18 percent. Harmful items like pan masala and tobacco can be taxed up to 40 percent. This will provide extra revenue to the government, while consumers will benefit from cheaper essential goods.
Effect of Reduction in Tax Rates
When GST was implemented in 2017, the effective average rate was 14.4 percent. By 2019, it came down to 11.6 percent. Now SBI estimates that after the new tax structure, it could reduce further to 9.5 percent. This is expected to benefit both consumers and industry.
There Will Be a Revenue Deficit in the Current Financial Year
SBI Research estimates the government will have to bear a loss of about Rs 45,000 crore in this financial year alone. However, by combining tax cuts and exemptions given in income tax, additional consumption of Rs 5.31 lakh crore is expected in the economy, which is about 1.6 percent of India’s GDP.
Current GST Rates
The current GST regime (GST 1.0) has four major slabs – 5 percent, 12 percent, 18 percent, and 28 percent, which apply to most goods and services. GST 2.0 aims to simplify and rationalise the structure by reducing these rates.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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