GST relief could lower prices on kitchenware, clothes, and shoes
What's the story
The Indian government is reportedly considering a reduction in Goods and Services Tax (GST) rates for middle and lower-income households. This comes after a slew of income tax concessions earlier this year. The proposal includes scrapping the 12% GST slab altogether or moving several goods currently taxed at 12% to the lower 5% bracket.
Affected goods
Items under the purview of proposed changes
The proposed restructuring would affect common household items such as toothpaste, tooth powder, umbrellas, sewing machines, pressure cookers, and kitchen utensils. Other products that could see a GST cut include electric irons, geysers, small-capacity washing machines, bicycles, readymade garments priced over ₹1,000, footwear priced between ₹500-₹1,000, stationery items, vaccines, ceramic tiles, agricultural tools, among others.
Cost impact
Proposed changes could cost government ₹40,000-50,000 crore
The proposed changes could cost the government between ₹40,000 crore and ₹50,000 crore. However, it is willing to bear the initial burden in hopes of boosting consumption. The government believes lower prices will lead to higher sales, eventually expanding the tax base and increasing long-term GST collections. Finance Minister Nirmala Sitharaman has hinted at these potential changes in a recent interview.
Council consensus
Not all states are on board with proposed changes
Despite the Centre's push, not all states are on board with these proposed changes. Under GST, rate changes require approval from the GST Council where every state has voting rights. Punjab, Kerala, Madhya Pradesh, and West Bengal have opposed the move so far. The issue is likely to be discussed at the 56th GST Council meeting later this month.