Upcoming GST reforms timely, much-needed: Tax experts

New Delhi, Aug 16 (IANS) Leading tax expert Ajay Rotti on Saturday welcomed the government's plan to overhaul the Goods and Services Tax (GST) structure, primarily into two tax slabs of 5 per cent and 18 per cent.

The Central Government has mulled reducing the current four-slab structure into two primary rates — 5 per cent and 18 per cent — while introducing a special 40 per cent slab for luxury and sin goods.

Around 99 per cent of items currently taxed at 12 per cent are expected to shift to the 5 per cent bracket, while 90 per cent of goods in the 28 per cent slab, including white goods, will move to 18 per cent.

In an interaction with IANS, Rotti called the Prime Minister Narendra Modi’s Independence Day remarks on GST reforms, especially on rate rationalisation, as "timely and much-needed".

"When GST was introduced, it adopted multiple rates: 5 per cent, 12 per cent, 18 per cent, and 28 per cent-- to achieve a revenue-neutral rate, as states were relinquishing VAT, octroi, and other taxes. This design was not suitable for the long term," Rotti said.

"The original vision included two main rates, such as a lower rate to encourage certain goods and support small businesses, and a standard rate, with a higher rate applied only to sin goods as an exception," he added.

The likely new structure will feature two major slabs: 5 per cent and 18 per cent, along with a 40 per cent rate for sin goods. The 12 per cent slab may merge with the 5 per cent slab, potentially benefiting the common man.

Everyday essentials and goods such as packed nuts, packaged food, butter, umbrellas, and sewing machines may see a tax reduction from 12 per cent to 5 per cent.

Rotti also welcomed S&P’s positive outlook on India’s sovereign rating and its stable GDP growth projection of 6.5 per cent. "This reflects economic resilience despite global challenges. The US tariffs have a minimal impact on India's economy, as exports from the US account for a small fraction of India's GDP," he told IANS.

The macroeconomic effect is minimal, but sectors such as textiles and marine exports may encounter challenges, necessitating government support, Rotti added.

Despite global challenges, India’s macro stability, tax growth, and growth momentum remained strong, and the GST reforms combined with stable growth projections are positive signs for the economy, he noted.

--IANS

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