The Diwali gift promised by PM Modi in his August 15 speech has been approved by the GST Council. GST will now have only two slabs - 5% and 18%. With the new changes, 5 categories of needs like milk-ghee, TV-AC, car-bike, insurance will become cheaper. However, there will be another slab of 40% for hobbies and luxury.
In the 56th meeting of the GST Council in New Delhi on 3 September, Finance Minister Nirmala Sitharaman reduced the 4 slabs of GST 5%, 12%, 18% and 28% to 2. That is, now there will be two slabs 5% and 18%.
The GST new tax slabs will come into effect from September 22. As a result, car buyers and sellers both have some confusions. One of the prevalent one being how much GST you have to pay if you have registered a car before September 22 and awaiting its delivery? Continue reading below
The Finance Ministry on Wednesday assured the people that they will release an FAQ to clear everything.
What happens to the rate if goods/services were supplied but invoices were issued later?
If the payment is received after the change in rate of tax, then time of supply shall be seen as the date of receipt of payment or the date of issue of invoice, whichever is earlier.
In a layman's language, for vehicles already bought and invoiced before September 22, the old GST and compensation cess structure applies and no extra GST is payable. For registrations or invoices on or after September 22, the new slabs apply (18% for small cars; flat 40% for large cars) with no compensation cess, regardless of booking date.
Common needs items like soap, shampoo, AC, car will also become cheaper. Many food items including milk, roti, pizza bread, chenna will be GST free. Individual health and life insurance will also not be taxed. 33 life saving medicines, medicines for rare diseases and serious diseases will also be tax free.
40% GST will now be levied on luxury items instead of 28%. Medium and large cars, motorcycles with more than 350cc engine will come under this slab.
The purpose of these changes is to provide relief to the common man, support small businesses and reduce the use of harmful products like tobacco by increasing tax on them.
The purpose of GST 2.0 is to simplify the tax structure, reduce the tax burden on common people, and promote small industries. Apart from this, the inverted duty structure is to be corrected.
