CA Manish Malhotra
There’s finally some good news on the Goods and Services Tax (GST) front after a long time. The Modi government has announced major changes to the eight-year-old GST regime. Now, there will only be two tax slabs — 5% and 18%. The 12% and 18% slabs have been axed.
After earlier changes in income tax exemptions and now these GST reforms, it has become clear that the Modi government listens to people’s concerns, understands them, and makes sincere efforts to resolve them. However, some questions still remain unanswered.
1. Automated Registration – Good Initiative, But Needs Clarity
Automated registration is a good step. However, it will only be truly rational if the process is completely free of human intervention. In simpler terms, if it’s not left to the discretion of any government official, it could turn out to be a highly effective move.
But one key question remains — if a business, after registration, incurs a liability of ₹2.5 lakhs, will it be required to switch to regular registration, or will the automated one still be valid? There is no clarity on this as yet.
2. Reduced GST Slabs – But Transport Becomes Costlier
The reduction in GST slabs is expected to lower the prices of many goods. However, it's important to note that the GST on Supply of transport of Goods through GTA or supply of transport of goods in containers by rail by any person other than Indin railways, SAC code 9965 has been increased from 12% to 18%.
This might prompt transport companies to increase freight charges to compensate for the additional 6% tax burden. In such a scenario, the price reduction that people are hoping for might not materialize, as higher freight costs could drive up the prices of goods.
It would have been better if the government had not increased GST on transportation.
3. Lower GST on Cement – Positive Step, But Needs Monitoring
The cut in GST on cement is a welcome move. It will reduce construction costs and may make the dream of owning a home slightly more affordable.
However, the real question is how the government ensures that the benefits reach the common people. Typically, those who are supposed to benefit often don’t see any real gains. The mechanism to ensure this needs to be clearly defined.
4. Relief on Stationery and Snacks – But What About Old Stock?
GST has been removed on stationery items like children’s notebooks, books, pencils, sharpeners, erasers, etc. Similarly, GST has been reduced on snacks like biscuits and savory items.
This is a big relief for the common consumer. However, there is a practical issue:
What happens to businesses that have already stocked goods until September 21 at the old tax rates?
Obviously, their procurement costs were higher. So does the government have a plan to compensate or adjust for this?
5. GST Removed from Life and Health Insurance – A Double-Edged Sword
GST has been removed from life and health insurance policies, a move that was being demanded for a long time. It’s expected that premium costs may go down now.
However, there’s also a flip side — insurance may become more expensive.
Earlier, insurance companies used to pay 18% GST but could claim Input Tax Credit (ITC) on business expenses. Now, with GST removed, they cannot claim ITC, which increases their operating costs.
To compensate for this loss, companies may decide to hike insurance premiums.
While GST 2.0 is undoubtedly a step in the right direction, several implementation challenges and policy gaps need to be addressed. For the reforms to truly benefit the public, clarity, transparency, and proper enforcement mechanisms are essential.
