A Group of Ministers (GoM) for rationalising GST rates is expected to recommend to the GST Council rejig on 150 goods and services including textiles. It is also likely to suggest a new slab of 35 per cent for tobacco and tobacco-related products against the present rate of 28 per cent (excluding compensation cess).
According to sources, all these issues were discussed on Monday in a meeting of GoM rate rationalisation chaired by Deputy Chief Minister of Bihar Samrat Chaudhary. The GoM agreed on several GST rate changes designed to simplify the GST framework and enhance revenue collection. The report is set to be presented at the 55th GST Council meeting on December 21 in Jaisalmer, which will be chaired by Finance Minister Nirmala Sitharaman.
It is believed that the GoM has recommended lowering rates for textiles, bicycles, exercise books — items of common use. According to a source, the GoM has suggested a revised slab structure that keeps the 5 per cent rate for textile items up to ₹1,500 but proposes an 18 per cent tax for products priced between ₹1,500 and ₹10,000. For textiles priced above ₹10,000, the report recommends a hike to 28 per cent, aligning them with luxury goods.
Textiles are one of the sectors facing issues related to an inverted duty structure (higher duty on raw materials and lower duty on output results in a refund). Earlier, the suggestion was to remove this by raising the rates in final outputs based on prices. However, because of political considerations, this recommendation was deferred. Currently, the GST rate structure for textiles applies a 5 per cent tax on items priced up to ₹1,000 and a 12 per cent tax on those priced above ₹1,000.
The GoM is believed to have suggested raising GST rates on several luxury items, including high-end wristwatches and shoes. Sources said the GoM has proposed increasing the GST rate on wristwatches priced above ₹25,000 from 18 per cent to 28 per cent. Similarly, shoes costing over ₹15,000 will also see a tax hike, with the rate going from 18 per cent to 28 per cent.
In a bid to provide relief on everyday essential items, the GoM has proposed lowering the GST on bicycles priced below ₹10,000 from 12 per cent to 5 per cent. Exercise books and packaged drinking water above 20 litres would also see a reduction in GST from 12 per cent and 18 per cent, respectively, to 5 per cent.