GST Council's Recent Decisions
On Independence Day, the Prime Minister announced the reduction and rationalisation of GST, which the GST Council has now implemented. This move aims to enhance India's indirect tax reform, promoting seamless movement of goods and services across the country.
GST Reduction and Rationalisation
- The GST Council, involving both Union and state governments, reaffirmed its bipartisan commitment to the tax reform despite recent political scrutiny.
- While some classifications have been simplified to reduce disputes, the council did not eliminate all red tape, leaving room for interpretation and legal disputes.
Impact on Goods and Services
- Amendments included resolving the inverted duty structure for certain commodities, although more comprehensive reforms were anticipated.
- By reducing tax slabs and moving goods to lower tax categories, the council signalled potential tax and price reductions, potentially increasing consumption.
- Aspirational goods like television sets, air conditioners, washing machines, and small cars will be cheaper during the festive season.
Cooperative Federalism and GST
- The GST, based on cooperative federalism, unified India economically by merging 17 taxes and 13 cesses from 36 jurisdictions into a single tax regime.
- The ‘grand bargain’ involved states surrendering their right to tax goods in exchange for a share in service tax revenues and a guaranteed 14% annual revenue growth for five years.
Challenges and Classification Issues
- Past GST classification issues, such as the varying tax rates on popcorn and Indian breads, have been partly addressed.
- Salted/spicy popcorn will now uniformly be taxed at 5%, while caramelised popcorn remains at 18%.
- Exemptions are provided for Indian breads like roti, khakhra, and parantha, while issues persist with classifications like parantha vs pizza bread and paneer vs cheese.
Future Prospects
- The council's decision to classify 'sin' goods as 'de-merit' goods indicates a shift towards aligning with India's developmental goals for 2047.
