Prime Minister Narendra Modi on Tuesday has promised to ensure that 99% of items attract GST at 18% or lower, leaving luxury items only to be taxed at the highest rate of 28%. Speaking at the Republic Summit in Mumbai, he said that he had given his suggestions to the federal indirect tax body, the GST Council, which is set to meet in New Delhi on Saturday. Modi’s promise would require cutting tax rates on about 25 categories to 18% or lower from 28%. Currently, 39 of the around 1,378 tariff categories are taxed at 28%.
If the Council does clear the tax cuts, it will be the biggest reduction since July, when the federal body slashed tax rates on 14 product categories from 28%, most of them to 18%, besides abolishing GST on items such as sanitary napkins.
“GST has given the society and entrepreneurs a simple and efficient free of inspector raj. Broad-based consultations have led to changes in GST over time. Today, it is settled to a large extent. We are reaching a situation where 99% of items could be brought in 18% GST rate or lower. We are going in the direction of leaving only luxury items or in the 28% slab,” said the Prime Minister.
“The political dynamics and the priority of the council are fast changing,” said the official cited earlier.
The highest slab of 28% was originally envisaged only for a few luxury and sin products, but was made applicable to several other items. According to experts, the pruning of this slab is desirable for the manufacturing sector. “From a policy standpoint, it will be good if this category is limited to only a few select products and it will be interesting to see if the GST Council takes this decision in the upcoming meeting.”