After consumer products and other daily use items, the government is now looking to reduce goods and services tax (GST) on consumer durables like washing machines and refrigerators from the current level of 28% as part of the next round of rationalisation.
The official said that a part of the reason for lower levy on restaurants was also to free women from household chores, which begin with packing lunch for children in the morning and extend till late at night. Globally, products such as dish washers and washing machines are seen to be items which have unburdened women, leaving them with more time for themselves or other productive work. Besides, products such as dish washers are largely imported into India and lower local levies through GST may also provide an incentive to companies to manufacture them in India, instead of shipping them from South Korea and other countries. Several white goods are already in the 12% and 18% brackets.
M S Mani, partner at Deloitte India, said, “All consumer durables, if taxed uniformly at 18%, would give a big fillip to domestic manufacturers as this would also lead to significant price reduction, leading to increased demand. Several of them such as dishwashers and air-conditioners have, over a period of time, ceased to be luxuries, making an 18% rate a reasonable request.”
Last week, GST rates on restaurants, other than those in five-star hotels, were slashed from 18% to 5%, although the withdrawal of input tax credit has prompted many chains to jack up prices. The cut came along with a reduction in levies for over 200 items, with 178 of them being from the top slab of 28%, leaving only 50 goods in the highest bracket.
In case of 176 products, GST has been reduced to 18% and ministers have indicated that further rationalisation will take place, depending on revenue buoyancy, with only luxury and sin goods facing higher taxes. In that sense, white goods and a few commodities like cement do not belong to the highest bracket but are continuing their due to revenue considerations as the government does not want to lose out on mop-up and put pressure on the fiscal situation. Over a period of time, the idea is to move to three rates by converging the 12% and 18% slabs into one, while leaving processed foods and other household items in the 5% bracket. Some ministers also discussed the possibility of a two-rate structure in the long run.
GST Council decided against paring rates on cement as it would have resulted in an annual revenue loss of around Rs 15,000 crore over and above the potential loss of Rs 20,000 crore from the more than 200 items on which rates have been reduced. Although the timing for a cut in taxes on white goods has not been decided yet, the decision may be taken at the next meeting of the GST Council itself. The council, headed by finance minister Arun Jaitley, includes finance ministers from all the states and two Union territories