Eight years after a row, the tax regime is undergoing a significant revision that will come into effect on Monday 22 September. It is expected to strengthen the largest Indian growth driver – private expenses for final consumption or household expenditure. Official estimates indicate that this could lead £2 trillion demand for consumption.
Mint looks in detail at what GST 2.0 means for the Indian economy, how companies should navigate with changes and how consumers can ensure that they benefit from tax reduction.
What is GST 2.0?
GST offers consumers transparency on how much tax pays for any product or service, unlike the previous central excise tax system, which only showed taxes paid in the final phase of the supplier chain.
While the introduction of GST has led to an overall tax reduction, its openness revealed the actual tax occurrence of consumption, which was only partially visible earlier. Consumers often complained of indirect tax, while economists proposed further reduction of tax rates.
Over the past few years, the Union’s government has taken measures to accelerate India’s economic growth, such as a reduction in income tax rate to corporations, allowing greater access to loans for small businesses. And to expand their own capital expenditures in the hope that they are invoking private investments.
This year it focuses on consumption. The financial year began with relief of income tax for individuals in the budget. A large stimulus of consumption is now done by reducing taxes and services. Politicians hope to speed up economic growth by increasing demand for goods and services and encouraging enterprises to increase investment and rent.
What are the key elements of the reform?
The reform simplifies the tax system to two main boards 5%and 18%, with several items such as tobacco and top cars, in a new, remote board 40%. Currently, there are four main albums and other items on subjects in the highest 28% album. 12% and 28% boards were removed as well as CESS.
The life and health insurance bonuses that previously attract 18% of GST will now be exempt from tax.
Many bulk use items such as hair oil oil, soap bars, shampoos, toothbrushes, toothpaste, wheels, dishes, kitchen dishes and other household cells move 18% or 12% to 5%. Similarly, packed snacks, pasta, instant noodles, chocolate, coffee, canned meat, butter, etc. will move from 12% or 18% to 5%.
GST rates also decreased for air -conditioning, TVs, dishwashing machines, cars, agricultural goods such as tractors, harvesting or threshing machines, cement, pharmacies, hotel stays and wellness services.
GST registration and tax refund for businesses are also simplified. It is expected that repairs of tax anomalies in sectors such as leather, textiles and fertilizers will make these sectors more attractive to new investments.
What duties do companies have in the transitional period?
Businesses are expected to reduce the price of consumer reasonable with a tax reduction immediately. Businesses can voluntarily place stickers of revised prices on goods in their inventory, which were made before 22 September without blocking the original price. Businesses are obliged to issue pricers to their sellers and retailers and ensure compliance with regulations.
Manufacturers and importers must take immediate steps to sensitize their retailers regarding the revision of taxes and its impact on prices through all possible communication channels.
The packaging material produced previously can continue to be used by the end of March 2026, with appropriate changes in the sales price resulting from the change of tax rate.
The Indian Drug Price Regulator, the National Pharmaceutical Office for Prices (NPPA), asked all drug producers and marketing to revise the maximum retail prices of drugs and medical devices that will see tax cuts from Monday. Revised price lists must be shared with retailers and central and state drugs for drugs.
The Central Council of indirect taxes and customs (CBIC) explained that in the case of a discount after the sale provided to dealers via credit banknotes, etc. The original transaction price is not affected, so both the tax liability and the availability of the entry loan remains unchanged.
The technical aspects of the transition were included in the list of frequently asked CBIC questions to help businesses and retailers.
How can consumers gain the full advantage of new tax rates?
It is important that consumers know which products and services will have a lower GST rate from Monday. A question about a local retail store can help ensure you gain the benefits of lowering rates.
There is no specific forum for filing complaints about GST-related profits at present, but you can address regulators specific to sectors, public defenders and other disputes-red commissions.
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