Upcoming Changes in Tax Structure
There are some significant updates expected in the tax structure affecting 148 items. A recent report from the GST Group of Ministers (GoM) has suggested major changes to the tax rates on these items, with a particular focus on the textile sector. The proposed changes aim to increase government revenue and will be discussed in the upcoming GST Council meeting scheduled for December 21. It’s noted that the intention behind these changes is to lower the tax rates on essential items like clothing, bicycles, and exercise books, while simultaneously raising taxes on luxury goods to a flat rate of 28 percent.
Details from the GoM Meeting
The GoM convened on December 2, led by Bihar’s Deputy Chief Minister Samrat Chaudhary, to deliberate on these recommendations. The finalized report is set to be presented to Finance Minister Nirmala Sitharaman during the 55th GST Council meeting taking place in Jaisalmer. The proposed changes for the textile sector include keeping the GST on clothing priced up to ₹1,500 at 5 percent, while items priced between ₹1,500 and ₹10,000 would see a tax increase to 18 percent. Furthermore, clothing exceeding ₹10,000 is suggested to be taxed at 28 percent, aligning it with luxury goods.
Impact on Essential and Luxury Goods
The report puts forth significant proposals aimed at balancing the tax rates on essential and luxury items. For instance, luxury watches and shoes would face a tax hike, with the GST on watches priced over ₹25,000 and shoes over ₹15,000 both increasing to 28 percent. In contrast, to make everyday essentials more affordable, the report recommends reducing the GST on bicycles costing less than ₹10,000 from 12 percent to 5 percent. Additionally, the GST on exercise books is proposed to drop from 12 percent to 5 percent, and packaged drinking water over 20 liters could also see a reduction from 18 percent to 5 percent.
