GST slab for 99% items to be brought below 18%: PM Modi
19 Dec 2018
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Prime Minister Narendra Modi today said the government hopes to bring 99 per cent of the items now subjected to the Goods and Services Tax (GST) to be in the low end of the tax bracket.
Speaking at a function in Mumbai, ahead of the GST Council meeting on Saturday, Modi indicated that the 28 per cent slab will be restricted to just a few items, and that only 0.5 or 1 per cent of the total 1,200-odd items will continue to remain in the peak slab.
The high-tax bracket will essentially comprise luxury items such as big cars, aircraft and demerit goods such as cigarettes.
“Today, we are reaching the situation where 99 per cent of the things can be brought under 18 per cent or less tax. And we are moving in that direction. After that, half a per cent or one per cent luxury items will probably be left out of 18 per cent, including airplane purchases, buying a big car, alcohol, cigarettes and some things, which will not even be one per cent (of items),” Modi said at an event organised by Republic TV in Mumbai.
The government was of the view that further simplification of GST can be done, the Prime Minister said.
As of now, only around 3 per cent or 37 categories of items of the total 1,211 items are in the topmost slab. Around 97 per cent of the total items are already taxed at 18 per cent or below under GST.
Goods and services are categorised under five ST slabs - 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent — and the top and bottom ends have very low representations.
A reduction in GST rates on consumer items and those used in the construction sector will leave only luxury and demerit goods in the peak tax bracket.
A reduction in rates will involve a potential revenue loss on one side and a possible political and economic gains due to higher growth in a poll year.
According to sources, of the 37 items in the 28 per cent slab, items such as cement, television screens above 68 cm, some types of rubber tyres, and digital cameras, could see a rate reduction from 28 per cent. Items such as paan masala, aerated beverages, automobiles, revolvers and pistols, yachts for pleasure or sports, aircraft for personal use are expected to stay in the 28 per cent slab.
Movie tickets priced over Rs100, currently taxed at 28 per cent, could also see a rate reduction. States may also consider providing relief on their portion, the state GST.
A reduction in the number of items in the 28 per cent slab will imply a significant dent on GST collections.
A reduction in GST on cement would translate into a revenue loss of about Rs3,500 crore in the remaining three months of this fiscal. The annual cost of bringing cement in the 18 per cent slab is Rs14,000 crore as per official estimates.
