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Cuts in time: On the new GST system   | Current Affairs | Vision IAS

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Cuts in time: On the new GST system  

2 min read

Sweeping Changes to the GST Regime

The recent reforms in the Goods and Services Tax (GST) regime, authorized by the GST Council on September 3, 2025, have significantly impacted the economy and public sentiment. These changes are expected to boost optimism and demand through tax cuts.

Highlights of the GST Reforms

  • The GST Council, a federal body, quickly approved the reforms, which were pushed by the Centre.
  • Despite critiques of delayed implementation, no State had previously suggested such rate cuts.
  • The Prime Minister's announcement of the reforms in his Independence Day speech preceded the relevant meetings, but consensus was achieved swiftly.
  • The reforms predominantly feature reductions across nearly every sector, with few exceptions like high-end motorcycles and higher-priced apparel.

Implications of the GST Rate Cuts

  • These rate reductions complement income-tax cuts from the 2025 budget, potentially boosting consumption.
  • The government estimates a revenue impact of approximately ₹48,000 crore annually, though this may be underestimated.

Elimination of Compensation Cess

  • The GST Council decided against implementing a compensation cess, despite demands from opposition-governed States.
  • States are now encouraged to explore alternative revenue sources and rely on the 16th Finance Commission for support.

GST 2.0 and Future Steps

  • While GST 2.0 still has some anomalies and complexities, the removal of duty inversions and reduced paperwork mark significant improvements.
  • The government is advised to temporarily revive the National Anti-Profiteering Authority to ensure these rate cuts are effectively implemented from September 22.
  • Tags :
  • Taxes
  • G.S.T. Reforms
  • G.S.T. 2.0
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