GST Reforms: A Diwali Gift from PM Modi

In a significant development, Prime Minister Narendra Modi announced a comprehensive overhaul of the Goods and Services Tax (GST) regime, set to be unveiled by Diwali. These reforms aim to simplify the existing eight-year-old tax structure, focusing on reducing the cost of everyday items and resolving compliance issues, evasion, and litigation challenges that have marred the system.

The proposed GST reforms introduce two primary tax slabs of 5% and 18%, alongside a 40% top bracket for demerit goods such as tobacco and online gaming. Essential food items, education, and medicines will remain tax-free, while electronic goods will benefit from a significant tax reduction, moving from the 28% bracket to 18%. The announcement has been well-received, highlighting fewer burdens on the common man.

To enhance compliance, the finance ministry proposes streamlining the registration process for small businesses and startups, including pre-filled return filing to ease the effort needed for tax processes. The overhaul is expected to temporarily affect revenue but aims to spur economic growth and consumption, thereby recouping any losses in the short term.