After offering several income tax concessions earlier this year, the Central government is now looking at easing the tax burden on middle and lower-income households by reducing Goods and Services Tax (GST), according to sources. The government is reportedly considering removing the 12% GST slab entirely or moving many items currently under this category to the lower 5% bracket
As per a media report, the proposed GST restructuring is expected to focus on everyday items commonly used by the middle class and economically weaker sections. These include products like toothpaste, tooth powder, umbrellas, sewing machines, pressure cookers, kitchen utensils, electric irons, geysers, small washing machines, bicycles, readymade clothes priced above ₹1,000, footwear costing between ₹500 and ₹1,000, stationery, vaccines, ceramic tiles, and agricultural tools, among others.
If the proposed changes are implemented, many of these items will become more affordable. The government is also looking at a simplified and easy-to-comply GST.
Financial Impact
According to sources, the move will put a burden of Rs 40,000 crore to Rs 50,000 crore on the government, but it is prepared to absorb the initial impact.
The rationale behind this hinges on an anticipated boost in consumption. The Centre believes that lower prices will drive higher sales, ultimately resulting in a tax base and increased long-term GST collections.
Finance Minister Nirmala Sitharaman, in a recent interview, hinted at potential changes in GST rates, stating that the government was actively working towards a more rational structure and considering relief for the middle class on essential items.
The Opposition
Despite the Centre’s push, there has been no consensus among the states. Under the GST, rate changes require endorsement from the GST Council, where each state has voting rights. Currently, opposition is being reported from Punjab, Kerala, Madhya Pradesh, and West Bengal.
To date, voting has occurred only once in the history of the GST Council. Every other decision has been reached by consensus.
The issue is expected to come up in the 56th GST Council meeting, which could be convened later this month. By rule, a minimum notice of 15 days must be given to convene the Council.
The 12 per cent GST slab in India typically includes items that are of common use for middle and lower-income households, but which may not qualify as absolute essentials, which are taxed at 0 per cent or 5 per cent.
List of commonly used goods and services under the 12 per cent GST slab:
Tooth powder
Sanitary napkins (originally taxed, now at 0 per cent, but related feminine hygiene items may still fall under 12 per cent)
Hair oil
Soaps (some categories, others are at 18 per cent)
Toothpaste (some branded variants at 12 per cent, others at 18 per cent)
Umbrellas
Sewing machines
Water filters and purifiers (non-electric types)
Pressure cookers
Cookware and utensils made of aluminium, steel (some are at 12 per cent)
Electric irons
Water heaters (geysers)
Vacuum cleaners (low-capacity, non-commercial)
Washing machines (small capacity)
Bicycles
Carriages for disabled persons
Public transport vehicles (when sold, not for fare)
Readymade garments (priced above Rs 1,000) Footwear priced between Rs 500 and Rs 1,000
Most vaccines
Diagnostic kits for HIV, Hepatitis, TB
Certain Ayurvedic and Unani medicines
Exercise books
Geometry boxes
Drawing and colouring books
Maps and globes
Glazed tiles (basic, non-luxury variants)
Ready-mix concrete
Pre-fabricated buildings
Agricultural equipment like mechanical threshers
Packaged foods such as condensed milk, frozen vegetables (some variants)
Solar water heaters