Comprehensive changes are being prepared in the GST system, under which the existing four tax slabs of 5%, 12%, 18% and 28% can be reduced to three tax slabs.
The biggest change so far can be seen in the Goods and Services Tax (GST) system soon. Under this, the rates of GST can be simplified and efforts can also be made to increase the income of the states.
The GST system was implemented in 2017, after which the states were compensated by the central government to compensate for the loss of tax revenue. This GST compensation given to the states ends in June this year.
According to a report by Livemint, the new changes in GST are implemented in phases. These changes include reduction in tax exemption, introduction of only three rates under the GST tax slab and removal of tax anomalies on raw materials and intermediates.
The central and state governments may implement these proposed reforms in a phased manner, so that the impact of tax changes on the consumption of goods is minimized.
According to a report in Economic Times, a Group of Ministers (GoM) headed by Karnataka Chief Minister Basavaraj Bommai is going to meet soon to finalize the recommendations related to these changes. The final recommendations will be taken in the upcoming GST Council meeting.
These amendments also include an increase in the tax rate for the textile industry, which will address the loopholes in the inverted duty structure. Earlier, in the meeting of the GST Council held on December 31, the decision to increase the GST rate from 5 per cent to 12 per cent on several items of the textile and apparel industry was deferred.
On July 1, the compensation given to the states will end on the completion of five years of the current GST regime. This is a major concern for the states, but it will also pave the way for structural changes in the GST.
The end of GST compensation will have an impact on the budgets of the states, especially the states with large economies. Due to this, states will have to find new ways to increase revenue by removing tax exemptions on various items and reducing the number of slabs.
