Rate cuts in the highest tax bracket of 28% would lead to a revenue loss of about Rs 6,000 crore to the government
The government's decision to cut tax rates on a wide array of consumer items is bound to bring in cheer to consumers ahead of the festive season starting next month with Rakhi and Onam. However, the tax rationalisation measures are being seen more as populist politics than sound economics by many.
Ahead of the start of the festive season, the Goods and Services Tax (GST) Council on Saturday brought down the rates of over 100 items, including consumer goods and domestic electrical appliances.
With the new GST rates kicking in later this week, shopping for your next TV, refrigerator or washing machine would become a lot cheaper. Television sets (up to 26 inch), vacuum cleaners, water heaters, water coolers, grinder, mixers and juicers will also cost less with the reduction in tax rate on about 15 items from 28% to 18%. The new rates will be applicable from 27 July.
The cost of getting your house painted will also come down with the prices of paints, varnish and putty coming down. Similarly, GST rates on electric shavers, hair clippers, hair dryers, smoothing irons as well as cosmetics, perfumes and toilet sprays have been slashed from 28% to 18%. The cost of lithium-ion batteries for mobile phones and electric vehicles will also come down following a 10% cut in the tax rates.
GST rate has also been reduced from 18% to 5% on footwear costing up to Rs 1,000 and e-books for which print version exists.
Welcoming the government's move, president of Consumer Electronics and Appliances Manufacturers Association (CEAMA) Manish Sharma, who is also the CEO of Panasonic India and South Asia, said, "This is a welcome move by the government which has come at an impending time when we are just about to prepare ourselves for the upcoming festive season. The reduction of GST slab on television sets of up to 26 inches from 28% to 18% will certainly improve the penetration and affordability of the product in smaller towns across the country."
"This should be a good boost to the industry. This would stoke demand. Hopefully, we would see good growth in the washing machine segment for the rest of the year," says Haier India president Eric Braganza.
To protect the domestic industry, a number of handicraft items such as handbags, wooden frames, glass statues, glass art ware, lamps and bamboo flooring have been placed in the 12% tax bracket, down from 18%. The tax on handmade carpets, textile flooring, handmade tapestry and toran too has been brought down from 12% to 5%.
Talking about the revenue implication of the government's decision, an official of the finance ministry said, "The rate cuts in the highest tax bracket of 28% would lead to a revenue loss of about Rs 6,000 crore."
As many as 15 items have been moved from 28% to next 18% slab, leaving only 35 items, including ACs, automobiles, in the highest tax slab.
BONANZA TIME
- Rate cuts in the highest tax bracket of 28% would lead to a revenue loss of about Rs 6,000 crore to the government
- The new rates will be applicable from 27 July
- The cut in slab on TVs will improve penetration in small towns
(With PTI inputs)
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