GST 2.0: Affordable Small Cars, Higher Tax on Luxury Items

Preparations for GST 2.0, also known as the next-generation GST, are in the final stages in India. The central government has sent the draft of GST reforms to the states. It is expected that all states will cooperate so that the new system can be implemented before Diwali.

The central government claims that the GST reforms will benefit the poor, middle-class citizens, and businesses of all sizes. The government believes that small cars and entry-level bikes are not luxury items, so they should attract lower taxes.

Reducing taxes on small cars and budget motorcycles may boost their sales, which are currently under pressure due to rising demand for premium models. Luxury cars and bikes may fall under a special 40% tax slab.

Similarly, gold and silver will continue to be taxed at 3%, and diamonds at 0.25%, as per the existing rates.

Finance Minister Nirmala Sitharaman and her team have been working on GST 2.0 reforms for the past two and a half years. The goal is to create a simplified system that also prevents tax evasion and fraud.

The central government has already sent the proposal to a ministerial group, which will submit its recommendations to the GST Council. The final decision will be taken in the upcoming GST Council meeting.

The government is confident that even non-BJP-ruled states will not oppose the reform this time, as it directly benefits the poor, farmers, and middle class.