In order to increase affordability and consumption, the Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation is thinking about lowering the price ceiling for the lowest tax bracket on textiles and footwear, according to Government sources.
Raising the threshold to US $ 14 (Rs. 1200) or US $ 17.51 (Rs. 1500), below which a reduced GST rate will apply, is something the GoM on rate rationalisation may recommend. By updating the slabs for important industries like textiles and footwear, the goal is to increase demand, according to a source on the subject.
The GoM is currently thinking of keeping textiles in the 5 per cent slab that cost up to US $ 14 (Rs. 1200) or US $ 17.51 (Rs. 1500). Likewise, he stated that shoes priced within that updated range will still be subject to 12 per cent GST, with the higher 18 per cent slab only being applied above that threshold.
Under the existing system, textiles that cost less than US $ 11.67 (Rs 1,000) are subject to a GST rate of 5 per cent, while those that cost more are subject to a 12 per cent tax. Shoes up to US $ 11.67 (Rs. 1,000) are subject to the 12 per cent GST slab; anything over that is subject to the 18 per cent GST.
After the direct tax relief measures announced in the Interim Budget 2024, the idea, if approved by the GST Council, will be consistent with the Union government’s larger attempts to stimulate demand. Consumers in the mass and middle-income categories, where a little price difference frequently pushes goods into higher tax bands, may benefit greatly from this move, according to sources.
To encourage consumption-led growth, Finance Minister Nirmala Sitharaman included direct tax relief for individuals under the new tax structure in the Interim Budget. That action would be strengthened by the planned GST adjustment, which would reduce indirect tax obligations.
The next GST Council meeting is anticipated to discuss the GoM’s final recommendations.
