The GST Council meeting to decide on rate cuts, rationalisation begins today, with Union Finance Minister Nirmala Sitharaman at the helm. This crucial
58th meeting aims to reshape the Goods and Services Tax (GST) framework, focusing on significant reforms affecting various sectors.
Key Agenda Items
The council's agenda includes proposed GST rate reductions for approximately 175 items, ranging from essential goods to consumer electronics. A notable shift from the current four-tier GST system to a simplified two-slab structure is also under consideration. This proposed structure consists of a 5% rate for essential goods and an 18% rate for non-essential items, with an additional slab of 40% for luxury and sin goods.
Expected Rate Cuts
Among the items likely to see GST rate cuts are essential products such as toothpaste, shampoo, and soaps, which may drop from 18% to 5%. Other food items, including butter, cheese, and ready-to-eat snacks, could also benefit from this reduction. The changes are expected to significantly impact major consumer goods companies, including Hindustan Unilever Ltd. and Nestle India Ltd.
In the consumer electronics sector, items such as televisions and air-conditioners, which currently attract an 28% GST, may shift to the 18% slab. Additionally, the GST on cement is anticipated to decrease from 28% to 18%.
Implications for the Auto Industry
The automotive sector is poised for changes as well. Small petrol cars with engine sizes up to 1,200 cc may see their GST reduced from 28% to 18%. However, electric vehicles priced between Rs 20 lakh and Rs 40 lakh might face an increase in tax from 5% to 18%. This proposed adjustment could have mixed effects on manufacturers like Tata Motors Ltd. and Mahindra & Mahindra Ltd.
Moreover, the GST Council is likely to address the two-wheeler industry’s request to lower the GST rate from 28% to 18%. This move is expected to benefit companies such as Hero MotoCorp Ltd.
The GST Council meeting represents a significant step towards simplifying compliance and rationalising tax rates, ultimately aimed at boosting economic activity. Stakeholders from various sectors are keenly awaiting the outcomes of these discussions, which promise to reshape the GST landscape in India.
