The central government is planning to reduce Goods and Services Tax (GST) on many daily-use items to give relief to middle-class and lower-income households. After giving income tax benefits earlier this year, the Centre is now considering removing the 12 per cent GST slab or moving most items in this slab to the 5 per cent bracket, according to sources.

This means that several commonly used products may soon become cheaper. Items like toothpaste, tooth powder, umbrellas, pressure cookers, kitchen utensils, electric irons, geysers, washing machines, bicycles, and some clothes and footwear could be moved to the lower 5 per cent GST slab.

What items may become cheaper?

Sources said that the government wants to help people by making useful and everyday items more affordable. These include:

  • Toothpaste, tooth powder, soaps, and hair oil
  • Sanitary products, umbrellas, and sewing machines
  • Kitchen appliances like pressure cookers and utensils
  • Electric irons, geysers, and vacuum cleaners
  • Small washing machines and bicycles
  • Readymade garments priced above Rs 1,000
  • Footwear priced between Rs 500 and Rs 1,000
  • Stationery items like exercise books, geometry boxes, drawing books, and maps
  • Vaccines and diagnostic kits for HIV, TB, and Hepatitis
  • Agricultural tools, solar water heaters, and packaged food items like condensed milk and frozen vegetables

The government also wants to make GST easier and simpler for businesses to follow. This includes reducing the number of tax slabs and making rules less complicated.

What will be the financial impact?

Sources said that the move might cost the government Rs 40,000 crore to Rs 50,000 crore, but it is ready to take this cost in the beginning. Officials believe that cheaper goods will lead to more buying, which will help the economy. Over time, this could increase GST collection as more people buy these products.

Finance Minister Nirmala Sitharaman recently said in an interview that the government was "actively working towards a more rational structure" and was also "considering relief for the middle class on essential items."

Opposition from Some States

However, not all states agree with the Centre’s plan. Changes in GST rates must be approved by the GST Council, where each state has a vote. States like Punjab, Kerala, Madhya Pradesh, and West Bengal have shown opposition to the move.

Till now, voting has happened only once in the GST Council’s history. All other decisions were made with full agreement (consensus). The matter may be discussed in the upcoming 56th GST Council meeting, which could happen later this month. A 15-day notice is needed to hold the meeting.

The 12 per cent GST slab is used for goods that are useful to the middle and lower-income groups but are not counted as basic essentials. These are not as heavily taxed as luxury goods but are still taxed more than basic needs like food or medicines.

If the new plan is approved, millions of people may get relief on their regular expenses, and it could also give a boost to the market by increasing demand.

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