Next-Gen GST Reform: A Historic Diwali Gift for the Nation

Next-Gen GST Reform: A Historic Diwali Gift for the Nation

The government of India has announced a "Next-Gen GST Reform" aimed at making the Goods and Services Tax simpler and more beneficial for citizens, farmers, and businesses. The reform is being presented as a "Historic Diwali Gift for the Nation" to ease the cost of living and contribute to the "Aatmanirbhar Bharat" (Self-Reliant India) initiative.

Key Highlights of the Reform

The reform focuses on providing relief in several key sectors by reducing or eliminating GST.

1. Savings on Daily Essentials

GST on a range of essential items has been significantly reduced, from a previous 18% or 12% to just 5%. This includes products like:

• Bar soap, shampoo, toothpaste, and shaving cream: Tax reduced from 18% to 5%.
• Butter, ghee, cheese, and dairy spreads: Tax reduced from 12% to 5%.
• Pre-packaged namkeens, bhujia, and mixtures: Tax reduced from 12% to 5%.
• Utensils: Tax reduced from 12% to 5%.
• Feeding bottles, napkins, and baby liners: Tax reduced from 12% to 5%.
• Sewing machines and parts: Tax reduced from 12% to 5%.

2. Uplifting Farmers and Agriculture

To support the agricultural sector, the GST on several key items has been lowered.

• Tractors, tractor tires, and parts: Tax reduced from 18% to 5%.
• Specified bio-pesticides, manures, and fertilizers: Tax reduced from 12% to 5%.
• Drip irrigation systems and sprinklers: Tax reduced from 12% to 5%.
• Agricultural, horticultural, or forestry machines for soil preparation, cultivation, harvesting, and threshing: Tax reduced from 12% to 5%.

3. Relief in Healthcare and Education

The reform also provides major relief in healthcare and education.

• Individual health and life insurance: Tax is now nil, down from 18%.
• Thermometers: Tax reduced from 18% to 5%.
• Medical-grade oxygen: Tax reduced from 12% to 5%.
• All diagnostic kits and reagents: Tax reduced from 12% to 5%.
• Glucometer and test strips: Tax reduced from 12% to 5%.
• Corrective spectacles: Tax reduced from 12% to 5%.

Additionally, items for affordable education such as maps, charts, globes, pencils, sharpeners, crayons, pastels, exercise books, notebooks, and erasers now have a nil tax rate, down from 12%.

4. Savings on Automobile and Electronic Appliances

GST on automobiles has also been adjusted, with some categories seeing significant reductions.

• Petrol, hybrid, LPG, CNG cars (not exceeding 1,200 cc and 4,000mm): Tax reduced from 28% to 18%.
• Diesel and diesel hybrid cars (not exceeding 1,500 cc and 4,000mm): Tax reduced from 28% to 18%.
• Two-wheeled vehicles: Tax reduced from 28% to 18%.
• Motor vehicles (350 cc and below): Tax reduced from 28% to 18%.
• Motor vehicles for transport of goods: Tax reduced from 28% to 18%.

For electronics, GST has been lowered on items like air conditioners, televisions (32 inches and above), monitors, projectors, and dishwashing machines, from 28% to 18%.

Process Reforms and Refund Mechanisms

The reform also introduces process improvements to streamline the system.

• Process Reforms: Automatic registration will now be available within three working days for applicants, based on a data analysis system. The reform also provides automatic tax input credit for individuals who are not required to pass the GST exam.
• Refund: A sanctioned refund will be provided by a proper officer, and the system includes zero-rated supplies and simplified inverted duty structures.

The Prime Minister, Narendra Modi, stated that these reforms are a "gift for the nation" and will make the GST system "better and simpler." He believes these changes will reduce the tax burden for the general public, benefit small entrepreneurs, and simplify the tax process for everyone.