From Soap to Small Cars: GST Council Prepares to Reduce Tax Load

Finance Minister Nirmala Sitharaman address on Wednesday, August 20 setup three major groups of Ministers of States on GST. The meeting is organised in Delhi on August 20 and 21.

Bihar Deputy Chief Minister Samrat Choudhary is the executive of the Six member Group of Ministers, whereas the other members are Uttar Pradesh Finance Minister Suresh Kumar Khanna, West Bengal Finance Minister Chandrima Bhattacharya, Rajasthan Health Minister Gajendra Singh, Karnataka Revenue Minister Krishna Gowda and Kerala Finance Minister KN Balagopal.

After the Centre’s offer is accepted in the Group of Ministers meeting, it will be presented in the GST Council. and the next meeting will be organised in September. Under this Council the Union Finance Minister is the executive and the Finance Ministers of all the states are its members.

Lists of the major items likely to get cheaper (Under the new GST regime):

• Air conditioners from 28% to 18%
• Televisions from 28% to 18%
• Small cars from 28% to 18%
• Insurance premiums from 18% to 5% or nil
• Daily use items from 5% to nil

Air conditioners to be reduced from 28% to 18%

Tax rates on consumer durables such as air conditioners can drop from 28% to 18% and can reduce their prices by Rs 1500 to Rs 2500. Managing Director of one of the AC companies has requested the government to implement changes as soon as possible, as no one will purchase in August and September because customers will wait for the reduction in GST rates and till then the sales will be slow.

GST on small cars to be reduced from 28% to 18%

The Central government has suggested reducing the GST on small petrol-diesel cars from 28% to 18%. Recently, these are taxed at 28%. This is expected to increase the sales of Maruti and other companies.

HSBC Global Investment Research has said in one of its reports that this change in GST rates may increase the demand for vehicles in India and will also increase employment. It is estimated that the price of small cars can be reduced by 8% and big cars by 3% to 5%.

Highest revenue from 18% slab

Central government’s proposal, 99% of the items which are currently in the 12% slab will move to the 5% slab. Apart from this, 90% of the items in the 28% slab will move to the 18% slab. Recently, 7% of GST revenue comes from the 5% slab, 65% from the 12% slab and 11% from the 28% slab.

Several items which were earlier taxed at 12% or 18% will become cheaper for the consumers once they get covered under the 5% slab. This includes snacks and packed items mentioned below:

• Mobiles
• Tooth powder
• Hair oil
• Toothpaste
• Soaps
• Processed food
• Computers
• Umbrellas
• Computers
• Pressure cookers
• Water heater
• Electric irons
• Most Vaccines
• Solar water heaters and more