"The GoM on rate rationalisation has completed its report, which proposes major adjustments to tax rates on 148 items, with a particular focus on the textile industry"
The Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation, led by Deputy Chief Minister of Bihar Samrat Chaudhary, on Monday recommended a new slab of 35 per cent for tobacco, tobacco products and aerated drinks, according to sources. At present, such products are taxed at 28 per cent.
The upcoming GST Council meeting, to be chaired by Finance Minister Nirmala Sitharaman, on December 21, is expected to take up this matter. The meeting, to be held in Jaisalmer, would deliberate on a host of other issues that the GoM has recommended including an increase in GST rate on several luxury items such as leather bags, cosmetics, watches and shoes to 28 per cent from 18 per cent now, it is learnt.
West Bengal Finance Minister Chandrima Bhattacharya, Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh Khimsar and Kerala Finance Minister K N Balagopal attended the third and final GoM meeting in New Delhi on Monday.
The GoM on rate rationalisation has completed its report, which proposes major adjustments to tax rates on 148 items, with a particular focus on the textile industry, another source said.
These changes are expected to generate additional revenue and will likely be reviewed in the next GST Council meeting.
The GoM has proposed a revised tax slab structure that maintains 5 per cent GST for textile items priced up to Rs 1,500. However, it suggests increasing the tax to 18 per cent for products priced between Rs 1,500 and Rs 10,000. For textiles costing more than Rs 10,000, the GoM recommends raising the tax to 28 per cent, bringing it in line with luxury goods. Currently, the GST structure for textiles applies a 5 per cent tax on items priced up to Rs 1,000 and a 12 per cent tax on those priced above.
In an effort to ease the burden on essential items, the GoM has suggested reducing the GST rate on bicycles priced below Rs 10,000 from 12 per cent to 5 per cent. Additionally, the GST on exercise books and packaged drinking water over 20 liters would be lowered from 12 per cent and 18 per cent, respectively, to 5 per cent.
Currently, the GST operates under a four-tier structure with slabs of 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Essential items are either exempt or taxed at the lowest slab, while luxury and demerit goods are subject to the highest slab. Luxury and sin goods also incur an additional cess on top of the 28 per cent rate. At present, the average GST rate is around 12.2 per cent, which is below the revenue-neutral rate of 15.3 per cent, spurring the need for discussions on rate rationalisation.
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