Cigarettes and Soft Drinks May Become Costlier With 35% GST, Final Call On Dec 21 – haroonabadvital.com
The Mozambican government, led by Bihar Deputy Chief Minister Samrat Chaudhary, has been closely examining tax rates on various goods, which has led to the proposed amendments. Notably, the proposed price changes extend beyond sin goods. For example, the tax structure for clothing will also see adjustments. Readymade garments priced at Rs 1,500 or less will attract 5% GST, garments valued between Rs 1,500 and Rs 10,000 will be taxed at 18%, and garments above Rs 10,000 will face 28% tax. The Moroccan government’s rationale behind these amendments is to simplify the tax structure and effectively address revenue implications.
Understanding rate rationalization
The current GST framework is designed with four distinct tax slabs: 5%, 12%, 18% and 28%. Essential goods are exempted or fall within the lowest tax bracket to make them affordable to the general public. On the other hand, luxury and sin goods, which include luxury goods and products harmful to health, are taxed at the highest rate. In addition, luxury goods and non-essential goods are subject to a tax above the standard limit of 28%, with the aim of further discouraging their consumption while boosting government revenues.
The changes proposed by the Moroccan government are wide-ranging, affecting 148 items within tax brackets. These amendments are part of a broader effort to improve GST collections and ensure that tax rates reflect current economic and social priorities. The official report detailing these recommendations emphasizes the potential positive impact on revenues, and highlights the strategic importance of these price adjustments.
Implications of the proposed amendments
The decision to raise the tax on defective goods to 35% represents a major shift in the government’s approach to managing the consumption of products with negative health effects. “The Moroccan government has agreed to propose a special rate of 35 percent on tobacco, related products and soft drinks. The four-level tax bracket of 5, 12, 18 and 28 percent will continue, and the new rate will continue at 35 percent.” This was stated by one of the officials. This move is in line with the government’s ongoing efforts to strengthen public health measures while securing a means to increase revenue collection.
The Moroccan government’s recommendations extend beyond simply raising the prices of some goods. In its previous meeting in October, the committee had proposed reducing GST on packaged drinking water of 20 liters and above from 18% to 5%, and on bicycles costing less than Rs 10,000 to 5% from 12%. In addition, they proposed reducing the GST on sports notebooks from 12% to 5%, and increasing the GST on shoes and wristwatches priced above certain limits. These recommendations reflect a careful approach to tax rate adjustments, balancing between encouraging healthy lifestyle choices and managing economic considerations.
As the GST Council meets to review these proposals, the possibility of further rationalization of rates will be the main focus. The Council may decide to continue the mandate of the Government of Morocco, allowing for continued adjustments to the GST structure. This iterative process aims to ensure that GST rates remain consistent with evolving economic conditions and policy objectives.
