Revised GST Slab Rates in India for FY 2024-25: Key Changes and Impacts

Revised GST Slab Rates in India for FY 2024-25 by the GST Council

The Goods and Services Tax (GST) Council in India recently released a set of revised slab rates for the financial year 2024-25. These changes are expected to have an impact across various sectors, affecting businesses and consumers alike. This article covers the latest GST slab rate updates, key categories, GST on loans, cars, and gold, products likely to be added under GST, and the effects of these changes on the Indian economy.

Latest Update in GST Slab Rate

In a bid to align tax rates with the current economic situation, the GST Council revised the slab rates, aiming to balance the needs of revenue generation with the goal of stimulating growth. The four major GST slabs of 5%, 12%, 18%, and 28% remain intact, but specific products have been shifted to different categories. The Council has also updated rates for select services to address issues like inflation and increased input costs.

GST: Goods and Services Tax and Its Three Tax Categories

The GST system, introduced in 2017, is an indirect tax that replaced multiple indirect taxes with a single, unified tax. It has three main categories:

1. CGST (Central Goods and Services Tax): Levied by the Central Government.
2. SGST (State Goods and Services Tax): Collected by the State Governments.
3. IGST (Integrated Goods and Services Tax): Applied on interstate transactions.

The GST system has streamlined the tax process, promoting a unified market across India.

GST on Loans and Advances

Under GST regulations, loans and advances are primarily exempt from GST as they are classified as financial services. However, the processing fees, late payment fees, and other associated charges do attract a GST of 18%. This rate remains unchanged in the revised slab structure for FY 2024-25, making it essential for borrowers to be aware of the added cost on financial services beyond the principal and interest.

GST on Cars and Gold in India

GST on Cars

Cars continue to be taxed under the 28% slab, with additional cess charges depending on the type and luxury level of the vehicle. This high rate aims to control the demand for luxury and high-emission vehicles. However, electric vehicles (EVs) are taxed at a lower GST rate of 5%, encouraging consumers to shift towards environmentally friendly options.

GST on Gold

Gold in India is taxed at a 3% GST rate, with an additional 5% on making charges. This remains unchanged under the new slab rates, keeping gold relatively accessible, especially during the festive seasons and for jewelry exports.

Products Likely to be Introduced Under GST Slab Rates

To bring more uniformity, the GST Council has hinted at the inclusion of certain new products in the GST ambit, particularly in sectors that are currently unregulated by GST. These products may include:

• Petroleum Products: Petrol, diesel, and other petroleum products may soon be included, which could help stabilize fuel prices.
• Electricity: Including electricity under GST could reduce the overall cost for consumers and businesses.
• Alcohol: Currently exempt, there’s ongoing debate on whether alcohol could be added to the GST structure to curb excessive pricing and increase revenue.

GST Impact on the Indian Economy

The revised GST slab rates aim to create a balanced approach between revenue generation and economic growth. Key anticipated impacts include:

• Boost in Consumer Spending: The reduction of rates on essential and mid-range items may encourage consumer spending, which in turn drives economic growth.
• Increased Revenue: The high tax on luxury goods and services helps generate revenue for the government, essential for public infrastructure and welfare programs.
• Formalization of the Economy: By bringing more businesses under GST compliance, the Council promotes transparency and reduces tax evasion.

Increase in Exports

One positive outcome of GST has been its impact on exports. The streamlined tax structure and availability of input tax credit have made Indian goods more competitive in the global market. By reducing the cost of production, GST indirectly supports exports, especially for sectors like agriculture, textiles, and manufacturing. The revised GST rates are expected to continue supporting export-driven growth.

Protest Against GST Rates

Despite the Council's attempts to balance rates, certain groups and industries have raised objections. Small traders, specific state governments, and sectors like textiles and hospitality have argued that high GST rates impact their businesses negatively. Farmers and small retailers also feel the pinch, as rising input costs due to GST can make it challenging to maintain profitability.

GST Rates on Services

The GST rates on services typically fall under the 18% category, with some essential services exempt from GST altogether. This includes education, healthcare, and public transportation. Luxury services such as hotel accommodations, high-end restaurants, and services in the financial sector may attract higher rates or additional cess, contributing to government revenue from the luxury segment.

Disclaimer

This article is intended for informational purposes only and does not constitute tax or legal advice. For specific GST-related guidance or questions about compliance, consult a tax professional or legal advisor.