Durga Puja Delight: Modi Govt Unveils GST 2.0 Reforms Bringing Festive Savings and Economic Cheer

As the vibrant hues of Durga Puja begin to paint the nation, the Modi government has ushered in a wave of economic cheer, timing its latest Goods and Services Tax (GST) 2.0 reforms perfectly with the festive season. The 52nd GST Council meeting, held on October 7, 2023, delivered a series of significant decisions aimed at easing the financial burden on consumers and simplifying tax structures, while also clarifying stances on previously contentious issues.

Get ready to discover what gets cheaper, what stays expensive, and how these changes might impact your festive spending and beyond.

One of the most welcome announcements for health-conscious consumers and those observing fasts during the festive period is the substantial reduction in GST on millet flour.

Previously taxed at 18%, packaged millet flour will now attract a GST of just 5%. For those purchasing it loose, the tax burden completely vanishes, making this nutritious staple even more accessible. This move aligns with the government's push to promote millets, recognizing their health benefits and agricultural significance.

The festive spirit is further brightened by tax relief in the apparel and craft sectors.

Imitation Zari thread, a common embellishment for traditional wear and decorative items, will now see its GST rate slashed from 12% to a more affordable 5%. This reduction is expected to provide a much-needed boost to artisans and small businesses involved in craftwork, making festive attire and decorations more budget-friendly.

While not a new announcement from this specific meeting, it's worth noting that the paint industry previously benefited from a significant reduction in GST rates on water-based paints, from 28% to 18%, easing costs for home improvements.

Travellers and businesses utilizing railway services also have reason to cheer.

The GST Council has clarified and introduced exemptions for various railway services. Intra-railway movement of goods and passengers, particularly from an unlisted platform, will now enjoy a more favourable tax regime. Furthermore, the intra-railway movement of defence equipment and stores has been brought under tax exemptions, streamlining logistics for our armed forces.

Another significant relief comes for students and professionals: hostel accommodation services, when provided for up to a monthly charge of Rs 20,000, will now be exempt from GST, offering considerable savings on living expenses.

The reforms also touched upon industrial processes, with specific forms of ferrous and non-ferrous scrap receiving a clearer, more beneficial GST structure when processed via job work.

This move aims to support manufacturing and recycling industries, promoting a more circular economy.

However, not everything is getting cheaper. The government has reaffirmed its stance on certain luxury and entertainment services. Online gaming, casinos, and horse racing will continue to be subject to a substantial 28% GST, a decision that came into effect from October 1st.

This higher taxation reflects the government's view on these activities, categorizing them as services that warrant a higher tax bracket. Furthermore, the definition of SUVs for the application of a higher cess has been clarified, ensuring that only vehicles meeting specific criteria (length over 4000mm, engine capacity over 1500cc, and ground clearance over 170mm) attract the higher tax, bringing clarity to the automotive industry.

Beyond rate changes, the 52nd GST Council meeting also focused on procedural simplifications.

A major step in this direction is the simplification of the Input Service Distributor (ISD) mechanism. This change is poised to make tax compliance easier for businesses, especially those with multiple branches or centralized service procurement, by streamlining the distribution of input tax credit.

Additionally, the Council addressed various GSTR-9 and GSTR-9C related issues, aiming to simplify the annual return filing process for taxpayers.

In essence, these GST 2.0 reforms, unveiled just in time for Durga Puja, aim to inject liquidity into the economy and put more money in the hands of consumers, particularly for everyday essentials and traditional goods.

While some luxury services remain heavily taxed, the overall sentiment is one of relief and economic encouragement, setting a positive tone for the festive season and the months to come. These strategic adjustments by the Modi government underscore a continued effort to refine the GST framework, making it more efficient, equitable, and responsive to the nation's economic pulse.