PM urges states to cooperate in implementing GST reforms

Says poor, middle-class and businesses will benefit

New Delhi: Prime Minister Narendra Modi on Sunday said the Centre has circulated the draft of the next-generation Goods and Services Tax (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 inauguration of two expressways, the Prime Minister said the Centre intends to make the GST law simpler and revise tax rates.

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

“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 Goods and Services Tax  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 Goods and Services Tax  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 Goods and Services Tax  simpler and revise rates,” he said.

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 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 GST regime, doing away with the 12% and 28% slabs.

The changes that have come about after nearly six months of deliberations and dozens of meetings have been conceived in a way to ensure that demand for tax tweaks does not arise, and also that input tax credit (ITC) does not get accumulated in the system.

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 $40 billion of non-exempt Indian exports such as gems and jewellery, textiles and footwear.

The Prime Minister pitched for becoming ‘vocal for local’, exhorting Indians to buy made-in-India products.

“To make India stronger, we must take inspiration from Chakradhari Mohan (Lord Shri Krishna) to make India self reliant, we must follow the path of Charkhadhari Mohan (Mahatma Gandhi),” he said.

The Prime Minister further highlighted the trust shown by citizens in made-in-India mobile phones. “Eleven years ago, India imported most of its mobile phones. Today, the majority of Indians use made-in-India phones. India now manufactures and exports 30 to 35 crore mobile phones annually,” stated the PM.

Urging all citizens to place their trust in products made in India, the prime minister appealed to the people to choose Indian-made goods, stating, “If you are Indian, buy what is made in India.”

Referring to the ongoing festive season, Modi urged everyone to share the joy of local products with their loved ones. He called upon citizens to make a conscious decision to gift only those items that are made in India and crafted by Indians.

Addressing shopkeepers across the country, acknowledging that some may have sold foreign-made goods in pursuit of slightly higher profits, the Prime Minister clarified that they have done nothing wrong, but urged them to now embrace the mantra of ‘vocal for local’. He emphasised that this single step will benefit the nation and every item sold will support an Indian labourer or a poor citizen.

Emphasising that the money from each sale will remain within India and benefit fellow Indians, Modi said that this will enhance the purchasing power of Indian citizens and strengthen the economy. He appealed to shopkeepers to sell made-in-India products with pride.

Noting that made-in-India UPI (unified payment interface) has today become the world’s largest real-time digital payment platform, the Prime Minister highlighted that Indian-made rail coaches and locomotives are now witnessing growing demand in other countries.

The GST Council is expected to meet next month to deliberate on the tax reform proposal.

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.

About 20 per cent of items, including packaged food and beverages, apparel and hotel accommodation, are currently taxed at 12% GST and account for 5-10% of consumption and 5-6% GST revenue.

Moving them to a lower 5% slab may lead to loss of revenue, but the central government is hopeful that a boost in consumption would be able to make up for the deficit in the next few months.