New Delhi: In what could be a big relief for middle and low-income households, the Centre is preparing to reduce the Goods and Services Tax (GST) on certain items of daily need. According to sources, the government is contemplating elimination of the 12 per cent GST slab altogether or reclassifying many items currently taxed at 12 per cent into the lower 5 per cent bracket.
This restructuring would target items widely used by middle-class and economically weaker sections, such as toothpaste and tooth powder, umbrellas, sewing machines, pressure cookers and kitchen utensils, electric irons, geysers, small-capacity washing machines, bicycles, readymade garments priced over Rs 1,000, footwear priced between Rs 500 and Rs 1,000, stationery items, vaccines, ceramic tiles and agricultural tools, among other things.
While this move is likely to reduce earnings by Rs 40,000 – Rs 50,000 crore, the government seems ready to absorb the initial impact. This is based on the rationale that lower prices will boost consumption. The Centre believes that lower prices will drive higher sales, ultimately resulting in a tax base and increased long-term GST collections. The government is also looking at a simplified and easy-to-comply GST.
Union finance minister Nirmala Sitharaman had recently hinted at potential changes in GST rates, stating that the government was actively working towards a more rational structure and considering relief for the middle class on essential items.
However, any change in the GST rate will require endorsement from the GST Council, where every state has voting rights. Currently, there is opposition from Punjab, Kerala, Madhya Pradesh, and West Bengal.
The issue is expected to come up in the 56th GST Council meeting, which could be convened later this month. By rule, a minimum notice of 15 days must be given to convene the Council. Till date, voting has occurred only once in the history of the GST Council. Every other decision has been reached by consensus.
The 12 per cent GST slab in India typically includes items that are of common use for middle and lower-income households, but may not qualify as absolute essentials, which are taxed at 0 per cent or 5 per cent.
List of commonly used goods and services under the 12 per cent GST slab:
Tooth powder
Hair oil
Soaps (some categories, others are at 18 per cent)
Toothpaste (some branded variants at 12 per cent, others at 18 per cent)
Umbrellas
Sewing machines
Water filters and purifiers (non-electric types)
Pressure cookers
Cookware and utensils made of aluminium, steel (some are at 12 per cent)
Electric irons
Water heaters (geysers)
Vacuum cleaners (low-capacity, non-commercial)
Washing machines (small capacity)
Bicycles
Carriages for disabled persons
Public transport vehicles (when sold, not for fare)
Readymade garments (priced above Rs 1,000)
Footwear priced between Rs 500 and Rs 1,000
Most vaccines
Diagnostic kits for HIV, Hepatitis, TB
Certain Ayurvedic and Unani medicines
Exercise books
Geometry boxes
Drawing and colouring books
Maps and globes
Glazed tiles (basic, non-luxury variants)
Ready-mix concrete
Prefabricated buildings
Agricultural equipment like mechanical threshers
Packaged foods such as condensed milk, frozen vegetables (some variants)
Solar water heaters
