Key Points

In his address at the inauguration of two major highway projects in Delhi, the Prime Minister said: “For us, reform means the expansion of good governance, and continuous focus is being placed on reforms.”

He announced that in the coming days, several major reforms will be introduced to make both life and business easier.

“As part of this effort, a next-generation reform in GST is being planned. This Diwali, citizens will receive a double bonus through the GST reform," PM Modi remarked.

He said that the complete framework has been shared with all states, and expressed hope that all states will cooperate with this initiative of the government of India.

The Prime Minister urged for the swift completion of the process so that “this Diwali can be made even more special".

Adding that the government aims to simplify GST further and revise tax rates, the Prime Minister highlighted that the benefits of this reform will reach every household, especially the poor and middle class. The entrepreneurs of all scales, as well as traders and businesspersons, will gain from these changes.

Meanwhile, the Finance Ministry on Friday sent its proposal to the GST Council for introducing two GST rates of 5 per cent and 18 per cent across all goods going forward, according to government sources.

The proposed two-slab regime will replace the current four slabs in the goods and services tax (GST) regime, doing away with the 12 per cent and 28 per cent slabs.

Items that will be covered under the lower GST rate of 5 per cent will include, essential goods consumed by the common man, health-related items, handicrafts and insurance. While the other goods including manufactured products such as refrigerators and TVs will come under the 18 per cent slab.

However, sin and luxury goods such as cigarettes, tobacco, sugary drinks and pan masala will continue to be under a separate GST tax bracket of 40 per cent

The government is of the view that this rationalisation of GST will give a big boost to consumption and spur growth in the economy.

The GST Council, which includes finance ministers of states, is likely to meet in September to approve the proposal

The proposal came after Prime Minister Narendra Modi said during his Independence Day address from the Red Fort that the next generation reforms in GST will be unveiled by Diwali, which will provide "substantial" tax relief to the common man and benefit small businesses.

Key areas identified for next-generation reforms include the rationalisation of tax rates to benefit all sections of society, especially the common man, women, students, middle class, and farmers.

Among the proposals is the reduction of taxes on items used by the common man and aspirational goods. This would enhance affordability, boost consumption, and make essential and aspirational goods more accessible to a wider population.

The end of compensation cess has created fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability, according to the ministry.

The correction of inverted duty structures is aimed at aligning input and output tax rates so that there is a reduction in the accumulation of input tax credit. This would support domestic value addition.

- IANS