The government has unveiled significant proposals to revamp the Goods and Services Tax (GST) framework. The Group of Ministers (GoM) on GST rate rationalization, led by Bihar Deputy Chief Minister Samrat Chaudhary, has recommended raising the GST on sin goods like aerated beverages, cigarettes, and tobacco products from the existing 28% to a steep 35%. This marks one of the most significant tax hikes in recent years.
Impact on Apparel Tax Structure
The apparel sector is set to witness a major reshuffle in GST rates. The GoM has proposed the following tax brackets:
- Garments costing up to ₹1,500 will attract a GST of 5%.
- Mid-range garments priced between ₹1,500 and ₹10,000 will face an 18% tax.
- Premium apparel priced above ₹10,000 will incur a hefty 28% GST.
These changes aim to streamline taxation but could lead to increased prices for consumers, especially in the premium segment.
Sin Goods Take the Biggest Hit
Sin goods such as tobacco, cigarettes, and aerated drinks have been targeted with the highest proposed GST hike. The increase from 28% to 35% is designed to discourage consumption while boosting revenue. However, this could also lead to higher retail prices and potentially encourage black-market activity for these items.
Additional Proposed GST Revisions
The GoM has also recommended changes to several other product categories:
- Packaged drinking water (20 liters and above): Proposed GST reduction from 18% to 5%.
- Bicycles costing below ₹10,000: Tax cut from 12% to 5%.
- Exercise notebooks: GST reduction from 12% to 5%.
- Luxury shoes (above ₹15,000/pair): Tax hike from 18% to 28%.
- Wristwatches (above ₹25,000): Proposed increase from 18% to 28%.
These changes reflect a mix of rationalization efforts, aimed at reducing tax burdens on essential items while increasing levies on luxury and sin goods.
Positive Revenue Impact Anticipated
According to officials, these proposed changes will positively impact government revenue. The GoM has rationalized tax rates for 148 items, with the goal of simplifying the GST structure and boosting collections.
What’s Next? The Role of the GST Council
The final decision rests with the GST Council, which is chaired by the Union Finance Minister and includes state counterparts. The council will meet on December 21, 2024, to review the GoM’s recommendations and decide whether these changes should be implemented.
What It Means for Consumers
If approved, the revised GST rates will have a tangible impact on household budgets. While essential items like packaged drinking water and notebooks may become cheaper, luxury and sin goods will become significantly costlier. Apparel costs will also rise, especially for premium and mid-range garments.
Consumers and businesses alike will need to prepare for these changes, as they could alter purchasing decisions and affect disposable income. The proposed overhaul signifies the government’s focus on striking a balance between revenue generation and consumption patterns.
