The GST Council this week may approve lowering of the tax rates on a number of goods, including handmade furniture, bath fittings, plastic products and items of daily use like shampoo and soaps, which will give relief to the common man as well as businesses.
Sources said many items used by ordinary people which are now in the 28 per cent tax bracket could be brought down to 18 per cent. The GST Council is also likely to rationalise the tax rate in sectors where the total incidence of taxation has gone up because the goods were earlier either exempt from excise or attracted lower VAT rates in the previous indirect tax regime.
“A rationalisation of items in the 28 per cent tax bracket is expected. Most of the daily use items could be lowered to 18 per cent. Also, the tax rate on items like furniture, electric switches, plastic pipes could be relooked,” said official sources.
The GST Council, headed by finance minister Arun Jaitley, is due to meet in Guwahati on November 10.
At present, all types of furniture attract a 28 per cent tax under GST. Wooden furniture is made by unorganised sector artisans and is mostly used by middle class families, and there have been demands for lowering the tax rate on them. Bath fittings like shower baths, sinks, washbasins, bidets, lavatory pans, seats and covers, flushing cisterns and similar sanitaryware of plastics now attract a 28 per cent levy.
According to ground reports, high tax rates in furniture and bath fittings had resulted in people avoiding taxes by paying for these items in cash. In markets in Delhi and Noida, traders were asking people to pay in cash to avoid the high 28 per cent GST on furniture and bath fittings, which leads to encouragement of the cash economy and generation of black money.
Last month revenue secretary Hasmukh Adhia had said the number of goods in the highest 28 per cent GST slab would be brought down. However, the secretary had said the rationalisation of rates will happen only after the fitment committee does detailed calculations of its impact on revenue. He had pointed out that while fitting the goods and services in various tax brackets, the GST Council had taken into consideration only the excise duty and VAT rate applicable on those items prior to GST. He said there are industries where 95 per cent of production used to take place in MSME, and all of them used to avail excise duty exemption. “So that means the excise rate we have taken for that item is only theoretical in nature, and actually we have done a substantial increase in the rate. That way it is being pointed out that it is a theoretical rate which has been derived, there is a need for rationalisation. Instead of doing a piecemeal reduction here and there, we do need to look at the entire rate of 28 per cent,” Mr Adhia had said.