How the proposed GST reforms will leave more money in your wallet

Copyright © HT Digital Streams Limit all rights reserved. Next Generation Goods & Services Tax (GST) Reforms are on their way, which can put more money in people’s pockets, Photo: Pradeep Gaur/Munt Summary The new Blueprint of the Government, GST 2.0, now considered by a group of ministers (glue), rests on three major objectives: Simplified tax rate; solving structural problems; And what facilitated life for both businesses and consumers during the 79th Independence Day in India, Prime Minister Narendra Modi gave the country a festive promise before the festive season – a ‘double Diwali Bonanza’ in the form of GST 2.0. Eight years after the introduction of the indirect tax regime, the prime minister indicated that the Next Generation Goods & Services Tax (GST) reforms are on the way. It can put more money in people’s pockets, facilitate the burden on businesses and inject fresh energy into the economy before the year ends. The government’s new blueprint, now considered by a group of ministers (glue), is based on three major goals: the simplification of tax rates; solving structural problems; and facilitate life for both businesses and consumers. Although it may sound like technical policy conditions, it has a very real impact on everyday lives – from the price you pay for groceries to how quickly a small shop owner gets his tax refund. GST rate rationalization is the first pillar of great reform that is actively chased by the glue, giving a clear intention to make the tax regime simpler, fairer and more growth-oriented. At present, there are multiple pages: 0%, 5%, 12%, 18%and 28%. The plan is to move to just two main pages – a standard rate of 18% and a lower “merit” rate of 5% – with only a handful of exceptions. Under the proposed rate rationalization, many necessities for daily use, such as domestic groceries, cleaning supplies, stationery, basic kitchenware and ordinary shoes, which currently attract 12% GST to the 5% page. This shift would directly reduce prices for the ordinary man, making everyday life more affordable and putting more disposable income in people’s hands. With the end of the GST compensation chess, the government has more fiscal space to re -align the rates sustainably, without harming government revenue. The second pillar of structural reforms contains inverted legal structure correction and the solution of classification shells. The reverse duty structure is a persistent problem where the GST rate on raw materials is higher than the rate on the final product. This leads to excess input tax credits trapped in the system, and the money that businesses can otherwise use for salaries, new stock or expansion. For example, clothing makers buy synthetic materials that are taxed at 18%, but sell readable garments at 12%. Shoes manufacturers pay 18% GST on inputs such as Soles and Uppers, but sell shoes below £ 1,000 at 12% GST. Mobile manufacturers pay 18% on some components, but only reach 12% on the completed phone. The newspaper and pressure industry has a similar headache – the printing of ink and certain types of paper is taxed at 12% or 18%, but newspapers themselves are released, which means that publishers cannot claim the tax they paid on input. For small local newspapers, which are already struggling to struggle, this is a serious cash flow drain. The correction of these maladjustments will liberate working capital in industries, making them more competitive and resilient. Sore spots classification disputes in situations where similar products or services are taxed at different rates are another sore place, leading to confusion, headaches of compliance and court cases. The “Paratha versus Roti” saga is a widely published example. But disputes extend far beyond this: whether the pressure of school textbooks is an offer of goods at 12% or a service at 18%; Or a mobile charger as a ‘component’ that is taxed at 12% or taxes an ‘accessory’ at 18%. It may sound technical, but for businesses, the difference can mean significant demand in unexpected tax accounts. The simplification and clarification of classifications can dramatically reduce the litigation and bring about much -needed predictability. The third pillar, ease of life, focuses on making GST less burden to comply, especially for small traders, startups and exporters. Business registration will become fully online, faster and less paperwork. GST yields can be filled in advance, based on the data the system already has, which causes taxpayers to verify and submit. Refunds, which are often delayed for months, can be processed faster and more automatically, relieving the pressure of the cash flow. For exporters, especially in sectors such as textiles, engineering goods and processed foods, the proposed GST reforms may be a much-needed buffer against rising global trading pressure, including recent US tariff increases. By correcting the reverse duty structures and ensuring faster GST refunds, exporters will enjoy lower input costs and improved liquidity, and they help to remain competitive in international markets despite external winds. In essence, GST 2.0 can put more money in people’s pockets, facilitate the way for businesses and use the economy forward – while keeping tax rates in check. Mayank Mohanka is the founder of Taxaram India and a partner at SM Mohanka & Associates. Viewens is personally the business news, market news, news events and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #GST Read Next Story