Business & Economy

GST hike rolled back in new year 2022.

Goods and service tax (GST) is an indirect taxation system in India on the supply of goods and services. It is a destination based tax introduced in 2017 where a paradigm shift in levying tax has been observed. GST council established under Article 279A of the Indian Constitution makes important recommendations related to levying of tax in India. 

One of the recent changes in GST as per the recommendation of the Council in the 45th GST Council meeting is that the rates of GST on certain goods and services will be increased and it will take effect from January 1st 2022. 

This recommendation is brought up to balance with the Government’s expenditure which is rising due to the pandemic and also the revenue shortage as a result of recent fuel duty cuts. According to the GST Compensation Act, in June 2022 the fiscal cliff to the States will come to an end and hence to balance the expenditure of the centre and states the tax rates have been increased. 

The goods and services for which the rates will be increased are garments and textiles except cotton products which will attract 12% of GST, shoes will also attract 12% of tax. Passenger transport services provided by auto-rickshaw or taxi drivers through offline/manual mode would be exempted but when the same is provided thought any online platform it will attract 5% GST. The recent recommendation has got the food delivery platform to come under GST where they have to pay taxes up to 5% and issue invoices in respect of such services. The extra burden of tax will not be shifted on the end consumers but will be only paid by the online delivery platforms. 

GST Council had the 46th Council meeting on 31st December, 2021 and many states opposed the rise in the GST rates for textiles. So as of now the existing rates for textiles will continue and in the next GST Council meeting i.e., 47th meeting, the timeline for continuing with the same rates or increasing the rates will be decided.

Hence the rise in the tax rates will lead to rise in prices of remaining goods and services from January 1st, 2022 and the Government expenditure will start to stabilize with increase in the revenue.

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