The proposed overhaul of GST rules is expected to bring down prices of daily-use items by rationalising and reducing the number of brackets under which tax is imposed on various goods. The revised GST rates are likely to bring about a reduction in taxes on passenger vehicles, two-wheelers and consumer durables like washing machines.
It is learnt that the government plans to cut tax on 90 per cent of all goods on which 28 per cent GST has been imposed and put these products in the 18 per cent bracket. Similarly, many goods which attract 12 per cent tax are likely to face a reduced levy of 5 per cent. The 5 per cent bracket will include “daily-use” items. These items include toothpaste, umbrellas, sewing machines, pressure cookers. Bicycles, readymade garments (priced over Rs 1,000), and footwear (between Rs 500 and Rs 1,000) may also be included in this category, and so could be vaccines, ceramic tiles, agricultural tools, mobile phones, computers, hair oil, processed foods and stationery items.
On the other hand, there will be a special “sin tax” of 40 per cent on certain items, including tobacco products. There will be only five to seven goods in this list.
Some other items, like the ones produced by labour-intensive and export-oriented industries, like diamonds and precious stones, will attract tax as per existing rates. Petroleum products will, however, continue to be outside the purview of GST.
The expected consumption boost from this rationalisation, which will be confirmed after the GST Council meets in September, is expected to offset around Rs 50,000 crore in revenue loss.
Televisions, air-conditioners, refrigerators, washing machines, aerated water as well as some goods used in the construction industry, like ready-mix concrete and cement, may be put in the new 18 per cent GST list, making them cheaper.
Since the revised GST structure eliminates the 28 per cent category, cars and motorcycles will most likely drop to the new 18 per cent bracket, making them at least 10 per cent cheaper. The Nifty Auto index jumped 4.61 per cent on Monday morning on these expectations.
The GST overhaul and the resultant spending, the government hopes, will further boost economic growth, particularly after a big thumbs-up from global ratings agency Standard and Poor (S&P). S&P has upgraded India's credit rating for the first time in nearly two decades.
Appliance makers, in particular, are expecting a good festive season characterised by brisk sales as a result of the reduced GST rates. Air conditioners, for instance, are likely to get cheaper by Rs 1,500 to Rs 2,500, depending on the models. The expected reduction in price will also help in increasing the penetration of ACs. Similarly, the expected reduction in GST slab on TV screens above 32 inches from 28 per cent to 18 per cent will also bring down TV prices appreciably.
However, in a situation where GST on ACs and other appliances are reduced from 28 to 18 per cent, there will be a straight 6 to 7 per cent price reduction in the market since GST is normally charged on the base price.
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