As a part of the next round of rationalisation, the government is contemplating to cut GST tax on consumer durables. Currently, a rate of 28 percent is being levied on them. This move will help in increasing the demand in the sector as there were numerous criticisms of a slowdown. Also, this step will be targeted towards women and it will help in reducing their overall burden.
"All consumer durables, if taxed uniformly at 18%, would give a big fillip to domestic manufacturers as this would also lead to significant price reduction, leading to increased demand. Several of them — such as dishwashers and air-conditioners — have, over a period of time, ceased to be luxuries, making an 18% rate a reasonable request," said M S Mani, partner at Deloitte India.
Last week, the government had declared that all restaurants, except five-star hotels, will now charge taxes at 5 percent instead of the previous rate of 18 percent. This cut in the tax rates wasn’t just limited to eateries as the charges were reduced on more than 200 items across categories. Out of this number, 178 were from the top slab of 28 percent and this reduction left only 50 products in the highest tax bracket.
In the case of 176 items, GST has been slashed down to 18 percent and authorities have been hinting that these rates might be streamlined further. The decision of rationalising the rates will be dependent on the revenue buoyancy and it would be done in a manner which would leave only luxury and sin goods under the category of highest taxes. If this would be the case, then white goods and products like cement will no longer belong to the top slab. However, it hasn’t happened till now and the reason for this can be attributed to the government’s consideration to not wanting to lose the revenues and putting pressure on the current economic condition.
The decision of the GST Council is against trimming taxes on cement as this step would have caused an annual revenue loss of approximately INR 15,000 crore over and above the possible damage of INR 20,000 crore from the more than 200 items on which charges have been slashed.