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Government can make changes in GST

On the occasion of Independence Day, Prime Minister Narendra Modi made a big announcement about GST. He said that on Diwali, GST will bring a big improvement, which will reduce taxes. Under this, the rate of GST at insurance premium can be reduced from 18% to 5% or completely 0%. But insurance companies are worried about this matter. He says that due to reduced GST on insurance premium, tax pressure on them may increase, which will reduce their profits. They are also saying that the industry is going through many financial problems right now and due to the reduction in GST, these difficulties can increase further. Companies believe that if the government does this, then not only their profits will be affected, but customers may have to pay more money for premium.

What will be the effect of GST cut?

At present, 18% GST is imposed on insurance premium. However, companies get an advantage of this - input tax credit (ITC). Through ITC, companies make up for some of their expenses, which reduces the cost of premium to some extent. But if the government reduces the rate of GST to 5% or completely zero (nil), then companies will stop getting the benefit of ITC. The direct effect of this will be that they will have to bear their own expenses and the tax burden will increase.

Companies argue that when they do not get ITC, they will not be able to give any major relief in premium rates. That is, the expectation of cheap insurance premium for customers can also be broken. However, the government says that this change is being done with the aim of making the tax system easy, transparent and effective. This will reduce the tax burden on common people and small traders. But companies believe that this decision may increase new pressure on the industry.

GST 2.0 will have a big change in tax system

The government has made preparations to make a big change in GST i.e. Goods and Services Tax system. Soon GST 2.0 may be applied, which will make the tax system more simple and easy to understand than before. Under the new system, now only two main tax slabs will be 5% and 18%. This will make both tax calculation and recovery easier.

According to an Economic Times report, food items, medicines, education and health related things will either be taxed or they will be given a complete tax. This will reduce the burden on the pockets of common people. On the other hand, 18% tax can be levied on middle class household items like TV, fridge, AC. The government believes that this will make the tax system more clean and transparent and will stop tax evasion.

At the same time, the government is preparing to impose 40% tax on alcohol, tobacco and other luxury or harmful things. They will be kept in a special tax slab so that their use is limited and the government can also get more revenue. GST 2.0 will not only benefit traders, but it will also be easy for the common people to understand tax. The government may soon release its date and full plan.