In a significant move, the Goods and Services Tax (GST) Group of Ministers (GoM) has agreed upon a slew of rate revisions that are expected to bring in an additional Rs 22,000 crore annually. According to sources, these proposals are set to be presented to the GST Council during its upcoming meeting in November. The proposed changes aim to both raise taxes on luxury and sin goods and provide relief on essential items.
The GoM has suggested raising GST rates on several luxury items, including high-end wristwatches and shoes. Meanwhile, to make essential products more affordable, the group has proposed reducing GST on items such as bicycles, exercise books, and large packs of packaged drinking water.
A source close to the discussions highlighted the importance of these adjustments in addressing both revenue needs and consumer affordability. "The GST GoM on rate rationalisation has put forward changes on several items, which are expected to bring in additional revenue of Rs 22,000 crore annually," said the source.
Increase in GST for Luxury Goods
The GoM has proposed to increase the GST rate on wristwatches priced above Rs 25,000 from 18 percent to 28 percent. Similarly, shoes costing over Rs 15,000 will also see a tax hike, with the rate going from 18 percent to 28 percent.
These revisions are aimed at luxury segments of the market. "By raising taxes on premium items like wristwatches and high-end shoes, the government is looking to boost revenue without affecting the majority of consumers," a source explained.
Reduction in GST on Essential Goods
On the other hand, in a bid to provide relief on everyday essential items, the GoM has proposed lowering the GST on bicycles priced below Rs 10,000 from 12 percent to 5 percent. Exercise books and packaged drinking water above 20 liters would also see a reduction in GST from 12 percent and 18 percent, respectively, to 5 percent.
"This move is aimed at making essential products more affordable, especially for middle-class and lower-income groups. By reducing the GST on items like bicycles and exercise books, we hope to ease the burden on consumers," the source familiar with the discussions told Moneycontrol.
Discussion on Sin Goods
Another key proposal expected to be deliberated by the GoM in its next meeting is the possible increase in GST rates for certain sin goods which are currently under the 18 per cent rate. The GoM is considering raising this to 28 percent, reversing earlier reductions, he said.
The GST Council's upcoming meeting in November will provide more clarity on the implementation timeline and any further revisions to the proposed changes.
This set of proposals comes at a time when the government is seeking to improve tax revenues while simultaneously ensuring that inflationary pressures on essential items are mitigated. The GST Council’s November meeting will be key to determining the fate of these rate changes and their potential impact on both consumers and businesses across the country.
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