Draft of next-gen GST reforms sent to states, Diwali rollout planned, says PM Modi

New Delhi, Aug 17: Prime Minister Narendra Modi, on Sunday, said the Centre has circulated the draft of the next-generation GST reforms among states and sought their cooperation to implement the proposal before Diwali.

He said the reform in GST would benefit poor and middle-class people, as well as small and big businesses.

Addressing an event after the inauguration of two expressways in Delhi, the Prime Minister said the Centre intends to make the GST law simpler and revise tax rates.

"For us, reform signifies the advancement of good governance, which is why we place a strong emphasis on continuous improvement. In the near future, we are set to implement reforms aimed at making life and business operations smoother and more convenient. As part of this vision, next-generation reforms will be introduced under the GST framework. This Diwali, these GST reforms will bring a double bonus to the people, enhancing their celebrations," he said.

Modi said the Centre has sent the draft proposal of the GST reform to the states.

"I hope that all states will cooperate in the initiatives of the central government," he said, urging them to complete the process at the earliest so that the Diwali festival becomes more fabulous.

The objective of this reform is to make GST simpler and revise rates, he added.

The present GST tax rates of nil/zero on essential food items, 5% on daily use products, 12% on standard goods, 18% on electronics and services and 28% on luxury and sin goods will be replaced by by a two tax slabs of 5% and 18% plus a special 40% top bracket for 5-7 demerit goods.

The proposed two-slab regime, if approved by the GST Council, will replace the current four slabs in the Goods and Services Tax (GST) regime, doing away with the 12% and 28% slabs.

As many as 99% of items in the 12% category, such as butter, fruit juices and dry fruits, would move to a 5% tax rate. Similarly, electronic items like ACs, TVs, fridges, and washing machines, as well as other goods like cement, will be among the 90% of the items that will move from 28% to a lower 18% slab.

The move comes after US President Donald Trump imposed a 25% tariff on all goods India exports to the US, and planned doubling of the levy to 50% from August 27 to punish New Delhi for its oil purchases from Russia. The tariffs are likely to impact USD 40 billion of non-exempt Indian exports such as gems and jewellery, textiles and footwear.

Modi had announced the proposal to reform the GST law in his Independence Day speech on August 15 from the ramparts of Red Fort.

PTI