Srinagar, Aug 18: The Goods and Services Tax (GST) regime is set for a major revamp, described by Prime Minister Narendra Modi as a “next-generation” reform in his Independence Day address last week. The overhaul aims to bring down prices of essential goods by simplifying the structure and reducing the number of tax slabs.
As part of the changes, taxes on passenger vehicles and two-wheelers are also expected to be lowered. As per an NDTV report, a two-tier system with 5% and 18% brackets has been proposed, with items currently under the 12% and 28% slabs likely to be reclassified into these categories.
Specifically, according to sources the government plans to cut tax on 90 per cent of all goods currently attracting 28 per cent GST and drop these products into the 18 per cent bracket. A similarly large chunk of goods now taxed at 12 per cent will face reduced levies – five per cent only.
The five per cent bracket will include ‘daily-use’ items, the government had said.
In addition, 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, sources said.
Daily-use items may soon become cheaper under the proposed GST overhaul:
Sources told NDTV in July that products like toothpaste, umbrellas, pressure cookers, sewing machines, small washing machines, and bicycles could see price cuts. Readymade garments over ₹1,000, footwear between ₹500–₹1,000, vaccines, ceramic tiles, agricultural tools, mobile phones, computers, processed foods, hair oil, and school stationery may also be included.
Meanwhile, items like televisions, refrigerators, air-conditioners, washing machines, aerated drinks, and construction goods (cement, ready-mix concrete) are likely to fall under the new 18% GST slab.
Passenger vehicles, currently taxed at 28% plus cess, may shift to the 18% bracket—potentially cutting car and bike prices by 10%. Electric vehicles will continue at 5%.
Markets have already reacted, with the Nifty Auto index jumping 4.6% Monday morning.
The full product list will be announced later, but according to sources the government hopes lower taxes will spur consumer spending and growth. The reforms also follow S&P’s credit rating upgrade for India—the first in nearly 20 years.
