Indian consumers are likely to reap another round of big benefits in the next round of GST rate rejig. As per reports, the government may soon cut rates on consumer durables such as refrigerators and washing machines, which are currently in the 28% tax bracket.
The move is likely to be a significant boost for the sector plagued by excess capacity and slowdown. The economy will get a fillip from the likely consumption boost and better compliance in this key sector.
Although the council avoided taking the decision on white goods at the last meeting, experts said a cut in levies was only a matter of time because Modi government has been under pressure from various quarters — including traders, political parties and industry — to simplify and rationalise the GST framework further.
The council, headed by finance minister Arun Jaitley, includes finance ministers from all the states and two Union territories — Delhi and Puducherry.
At the GST council meet last week, rates on restaurants, other than those located in 5-star hotels, were cut from 18% to 5%. The cut accompanied a reduction in rates for over 200 items.
Also, the council left only 50 products in the highest — 28 per cent — slab, and raised the composition limit for small businesses, as part of a comprehensive overhaul of the new tax indirect tax regime.
Consumers and businesses stand to benefit alike from those cuts, with products ranging from perfumes to chocolates to fans becoming cheaper. It also helped defuse some of the criticism that has dogged the four-month-old tax system.
Veritable bonanza for customers
A plethora of products such as chocolates, toothpastes, shampoos and shaving creams – with the maximum retail price printed on them – have become cheaper following the cut in GST.
Some of the FMCG biggies have already issued directives to sellers and stockists to pass on the new rate benefits to customers.
The changes will affect a large number of products that are already in stores or on their way there. Pasting stickers with revised prices can be done only after the government gives the go ahead. Apart from taking time, some companies said pasting stickers costs the same as printing packs with the revised prices.
The maximum retail price of a product includes taxes and unless a company increases the base price or raises the margin for distributors and dealers, these products should become cheaper. Fresh guidelines on pasting stickers with the revised prices are awaited.
Various ministers have given indications that yet more rejigs of GST rates may be on the cards. Some ministers also dwelt on the possibility of a two-rate structure over the long term. Some products actually don’t belong to the high bracket; they are there just owing to revenue considerations, the government has said.