After income tax cuts, govt's focus on GST rationalisation; here's what official said

Finance Secretary Tuhin Kanta Pandey on Monday said there is a need to rationalise the Goods and Services Tax (GST) structure in consultation with states, as the country has gained sufficient experience in its implementation since 2017.

"Now that we have certain experience in GST implementation, it will be very important to see how things will be going forward. The exercise needed much more consultation with states in the Council," Pandey said at a post-budget interaction with industry representatives at FICCI.

He emphasised that rationalisation of GST rates is a work in progress and expressed hope that the process would be carried out in due course.

"Rationalisation is needed. There is recognition that it is needed. But how exactly it will be able to translate and what are the numbers, we will be able to arrive at, which are the rates we will be able to arrive at, that further exercise will be done by GoM," Pandey, who is also the Revenue Secretary, said.

The GoM, convened by Bihar Deputy Chief Minister Samrat Chaudhary, had earlier proposed rate changes on 148 items. Chaudhary had said in December that the panel would submit its report in the next GST Council meeting.

As part of the rationalisation exercise, the GoM suggested hiking the GST rate on sin goods like aerated beverages and tobacco products from 28% to 35%. At present, GST is levied in four slabs—5%, 12%, 18%, and 28%—with luxury and demerit goods attracting the highest rate. Essential goods, such as packaged food, are taxed at the lowest 5% slab.

The GoM's recommendations include raising GST on garments priced above ₹1,000 from 5% to 12%, increasing the tax rate on footwear costing above ₹15,000 per pair from 18% to 28%, and hiking GST on wristwatches above ₹25,000 from 18% to 28%.

On the other hand, the GoM proposed reducing GST on packaged drinking water (20 litres and above) from 18% to 5%, lowering the tax on bicycles costing less than ₹10,000 from 12% to 5%, and cutting the GST on exercise notebooks from 12% to 5%.

The GST rationalisation exercise has been long pending, with discussions on restructuring slabs ongoing since 2021. The final decision rests with the GST Council, which will take a call based on consensus among states.