Cuts in time , Pg8

Key Highlights:

• The GST Council authorized sweeping changes to the Goods and Services Tax (GST) regime.
• The GST rate cuts span nearly every sector, with very few items becoming more expensive.
• The government estimates the revenue implication of these GST rate cuts to be around ₹48,000 crore a year.
• The GST Council decided to do away with the compensation cess.
• The new GST 2.0 will be effective from September 22.

Detailed Insights:

• The GST rate cuts, coupled with the income-tax rate cuts announced in Budget 2025, should boost consumption.
• The GST Council is a federal body, and any of the States could have suggested these rate cuts earlier.
• The 40% GST bracket was kept narrow, avoiding the temptation to pack it with more items.
• States will need to look to their own revenue sources and the 16th Finance Commission to offset potential losses.
• The removal of duty inversions and the easing of paperwork are significant improvements in GST 2.0.
• The government should revive the National Anti-Profiteering Authority to ensure the rate cuts are passed on to consumers.

Key Concepts Involved:

• Goods and Services Tax (GST): An indirect tax levied on the supply of goods and services.
• Compensation Cess: A levy imposed to compensate states for revenue losses arising from the implementation of GST.
• Duty Inversion: A situation where the import duty on raw materials is higher than the import duty on finished goods.
• National Anti-Profiteering Authority: An authority to ensure that the benefits of GST rate reductions are passed on to consumers.