GST restructuring key reform, will boost India's economy: RC Bhargava

The proposal to restructure the GST structure is an exceedingly important reform measure that will result in a substantive improvement in the country's economy, Maruti Suzuki India (MSI) Chairman R C Bhargava said on Monday.

The Centre has proposed a two-tier GST structure of 5 and 18 per cent, besides a 40 per cent special rate on a select few items to the group of ministers (GoM) on GST rate rationalisation.

Goods and Services Tax (GST) is currently levied at 5, 12, 18 and 28 per cent. While food and essential items are either at nil or 5 per cent, luxury and demerit goods are in 28 per cent slab, with a cess on top of it.

If the Centre's proposal is accepted by the GoM, it would be placed before the GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising finance ministers from all states and UTs, in its meeting likely next month.

"The move by the government to restructure GST is an exceedingly important reform measure, and I think the government is doing an excellent thing with taking this up, because it will have substantive improvements in the economy as a result," Bhargava told PTI.

When asked to comment on the impact on the automotive industry, he noted: "Until we see the final decisions of the GST Council, on the GST system... it's better if we comment at that stage, rather than on assumptions."  Presently, automobiles are taxed at 28 per cent, which is the highest GST slab. A compensation cess, ranging from 1 to 22 per cent, is levied on top of this rate, depending on the type of vehicle.

The total tax incidence on cars, depending on engine capacity and length, ranges from 29 per cent for small petrol cars to 50 per cent for SUVs.

Electric vehicles are taxed at a 5 per cent rate.

The Centre's proposal entails moving 99 per cent of the goods in the current 12 per cent slab to 5 per cent, and 90 per cent of the goods and services in 28 per cent slab to the 18 per cent bracket.