Many changes have been made to GST in India (or GST India) since its announcement in 2017. As there are many things that don’t include GST, some have 5% or 12% or 18% or the highest one is 28%. The government (both center and state) changes continuously to ensure that they never face a deficiency of funds. Recently here one more GST council meeting has been done, and many significant changes have been announced. All changes will be implemented from 18 July 2022.
In this article, we will look into what changes have been done and also the reasons for these changes. In the end will also find out how this will affect inflation.
GST council is shared by our Finance Minister, and it also contains the state finance ministers. These massive changes have been done in the last GST council meeting which 47th GST council. A few times ago the council had decided that there is a need for rationalization in the prices of goods. That means there are some goods and services which have high prices that don’t deserve and some have low which deserve to be high. So to balance this we should have to install some rationalization in the prices.
To resolve this problem a group of ministers has been appointed and headed by Karnataka Chief Minister Basavaraj Bommai. They created an interim report, under which many big changes have been done in GST.
Changes happened in GST India
There are considerable changes that have been done in GST India which I will show in the table. But I found two major changes which are
- There were many items that include less amount of GST or zero GST like homemade pickles, lassi, etc. which are also considered unbranded items. Now will face GST. GST will also increase for LED lamps, pencil sharpeners, printing, drawing and writing ink, cutlery, and hospital rooms.
- Another massive change is that those services had slab prices like a minimum price they don’t have to pay for any services. Now they have to pay. Several items which include services provided by financial regulators and hotel rooms below Rs 1,000 and non-ICU hospital rooms that cost more than Rs 5,000 a day per patient, which are currently exempted from the tax will also be included in the tax.
As the Centre and the states seek to bolster their collection and spigot leakages of the fifty anniversary of the roll-out of the tax reform measures.
Subsequently, here are some relief is also provided for certain services, such as ropeways and goods carriage through rented trucks as well as implants and intraocular lenses.
Inverted Duty Structure corrected
This time GST Council decided to end exemptions and corrected the inverted duty structures for many items. Let’s take an example to understand inverted duty structures. Suppose there is a company that makes Cars. Then it takes steel, and machinery parts, and they pay 28% GST for it. And when they sell that car, then that car includes 18% GST. So these differences in GST are called inverted duty structures. It was a major issue and that thing is corrected this time.
State also supported this correction. The panel of ministers is seeking to ensure that intermediaries are not taxed at a higher rate than the final product which was the case in several segments.
Will it affect Inflation?
Definitely, it will affect inflation. The finance minister has pointed out that we are well aware of it and states too had weighed the possible targets.
She also added” They are all looking at the system keeping that in mind. So, decisions taken by the council are not as though they are being taken in isolation. Elected representatives who are part of the GST council are fully conscious”.
In Last (Reason of these changes in GST India)
GST council show concern towards average revenue rates by GST that has dropped to under 12%. At the time of the launch of GST India, the tax rate at which the centre and the states would not have been worse off than the previous was estimated at 15.5%. This we can consider as if it happens below 15.5% then the government will be at a loss. We all can see that every year revenue collected by the government is increasing but if we at the average then according to the govt. it’s in the loss.