GoM Suggests GST cut on packaged drinking water, bicycles to 5%

A group of ministers Group that headed the GST rate rationalisation met under Bihar Deputy Chief Minister Samrat Chaudhary on Wednesday and proposed significant changes to the tax rates, now lowering the GST on 20-litre packaged drinking water bottles, bicycles, and exercise notebooks to 5 per cent.

If accepted, the GST council would reduce the GST on packaged drinking water to 5per cent and on bicycles priced under Rs 10,000 to 5 per cent. The tax on exercise notebooks also would come down from 12 per cent to 5 per cent.

The GoM would further recommend that the GST for luxury items should be increased. For example, there are shoes priced over Rs 15,000 and wristwatches above Rs 25,000. Currently, they attract a GST of 18 per cent. The GoM has suggested increasing this to 28 per cent.

The GoM, which includes finance ministers of states, discussed tax rework on over 100 items to make them less burdensome for consumers. Items that were going to be included in the rate hike list earlier include hair dryers and beauty care products. These items might now go back into the 28 per cent slab.

In its existing form, GST has four tax slabs: 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Typically, essential goods attract minor rates, whereas luxury and demerit goods attract higher rates.

The proposal that is expected to add Rs 22,000 crore to revenue and, hence, accelerate rates suggests a continued requirement for GST rates to be as close to, if not less than, revenue-neutral targets. With average GST rates now below the revenue-neutral rate of 15.3 per cent, renewed calls for rationalization have begun.