The Goods and Services Tax Council in India is due to consider recommendations to raise GST rates on specific commodities such as tobacco products, aerated drinks, and high-end clothes to 35% from the existing 28%. The Group of Ministers (GoM) has issued a suggestion to rationalize GST rates in order to increase revenue and streamline tax systems.
Proposed Changes
- New 35% Slab The hike aims to discourage consumption of “sin goods” like tobacco and aerated drinks while increasing government revenue.
- Revised Taxation for Apparel
- Garments up to ₹1,500 would be charged 5% GST.
- Garments between ₹1,500 and ₹10,000 to be charged18% GST.
- Garments above ₹10,000 to be charged 28% GST.
- Luxury Items A cess will continue to apply on top of the highest tax slab for items like cars and premium watches.
Revenue Implications
The GoM anticipates these adjustments to boost net revenue. With over 148 commodities under consideration for new tax rates, these changes will be submitted to the GST Council on December 21, 2024. The Council, chaired by the Union Finance Minister and state ministers, will finalise these ideas.
This strategy is consistent with global trends of aggressively charging undesirable commodities in order to reduce consumption and address public health issues. Furthermore, increased money from luxury and non-essential commodities might help support critical services.
