New Delhi, Sep 22 : There has been a general reaction of relief and welcome with the new Goods and Services Tax (GST) slabs coming into effect beginning from Monday.

Essential goods, healthcare, insurance, consumer durables, and agricultural inputs now enjoy lower rates, while luxury and sin goods are taxed at 40 per cent.

The reform aims to reduce the cost of living for households, support manufacturing, agriculture, and services.

"This festive season, let's celebrate the 'GST Bachat Utsav'! Lower GST rates mean more savings for every household and greater ease for businesses," Prime Minister Narendra Modi posted on his X handle on Monday evening.

Central Board of Excise and Customs' (CBEC) former Chairman Sumit Dutt Majumder said that GST 2.0 has some changes with a lesser number of slabs.

As a Member, Central Excise, and then Chairman of the CBEC, he was associated with the preparations for the earlier GST regime. He had also presented his views to the then Select Committee of the Rajya Sabha on the GST Constitution Amendment Bill.

"Even by the earlier GST regime, in inter-state transactions, the destination state gets the money. While the tax collection is done by the Centre, there are rules laid out for transferring the money to states," Majumder, the author of two books on GST, added.

GST Network's (GSTN) first Chairman, Navin Kumar, also stressed the rules that are followed in transferring prescribed amounts to states.

"In the previous regime, too, some states had apprehended losses. Thus, the Centre introduced compensation. When the collection started growing, these compensations were withdrawn," he added.

Though the earlier five-year compensation window ended in 2022, the Centre may introduce ad hoc transfers or cess adjustments to blunt state revenue shocks.

It may also absorb part of the potential GST revenue loss initially to maintain national fiscal stability, leveraging higher taxes on luxury and sin goods and broader compliance measures.

Tax collection on goods with lower GST rates is expected to fall initially because rates are now lower on many items. According to the government, the potential revenue shortfall, without any buoyancy in volumes, will be Rs 48,000 crore a year.

"There'll be an initial effect, but I'm sure that with the restructured GST regime, there will be an increase in revenue," Kumar said.

Lower GST on essentials is expected to boost consumption, particularly through increased sales of durables, automotives, and housing materials.

Also, short-term challenges are possible due to transition issues, IT system challenges, and working-capital pressures, especially among SMEs.

"I think there should have been a transition period," reflected Majumder.

"In branded products, the prices are fixed. So, it will take time to adjust to the rates introduced today," he pointed out.

However, Kumar pointed out that there are mechanisms that can address such aspects.

If stock bearing earlier retail prices remains unsold after the revised GST rate came into effect, rules prescribe that a revised MRP be put on it. Thus, both old and new prices are visible on the product.

Transitional issues, such as pre-existing inventory credits, are addressed via post-implementation filing (e.g., GSTR-3B ' or monthly self-declaration return ' to be filed by October 20) to avoid input tax credit (ITC) mismatches ' discrepancy between the tax credit claimed by the recipient and the details furnished by the supplier ' but no general delay is provided.

/IANS