Centre Considers Major GST Relief for Middle, Lower-Income Households

GG News Bureau
New Delhi, 2nd July: Following earlier income tax concessions, the Central government is now reportedly preparing to offer significant relief to middle and lower-income households through a potential reduction in the Goods and Services Tax (GST). Sources indicate that the Centre is contemplating either entirely eliminating the 12 percent GST slab or reclassifying numerous items currently taxed at 12 percent into the lower 5 percent bracket.

This proposed restructuring aims to make a wide array of commonly used goods more affordable for the middle class and economically weaker sections. Items under consideration for reclassification include essential household products such as toothpaste and tooth powder, umbrellas, sewing machines, pressure cookers, kitchen utensils, electric irons, geysers, small-capacity washing machines, bicycles, and certain readymade garments and footwear. Stationery items, vaccines, ceramic tiles, and agricultural tools are also on the list. If implemented, these changes would lead to a noticeable reduction in prices for consumers. The government is also reportedly focused on simplifying the GST framework to enhance ease of compliance.

Financial Impact and Rationale

While this move is expected to impose an initial burden of ₹40,000 crore to ₹50,000 crore on the government exchequer, sources suggest the Centre is prepared to absorb this impact. The rationale behind this decision is rooted in the belief that lower prices will stimulate higher consumption, thereby expanding the tax base and ultimately leading to increased long-term GST collections.

Finance Minister Nirmala Sitharaman recently hinted at potential adjustments to GST rates, confirming that the government is actively working towards a more rational tax structure and considering relief on essential items for the middle class.

Opposition and Path Forward

Despite the Centre’s intentions, achieving consensus among states remains a challenge. Under the GST framework, any changes to tax rates require the endorsement of the GST Council, where each state holds voting rights. Currently, states like Punjab, Kerala, Madhya Pradesh, and West Bengal are reportedly opposing the proposed changes.

Historically, the GST Council has reached decisions primarily through consensus, with voting occurring only once since its inception. This critical issue is anticipated to be a key agenda item at the 56th GST Council meeting, which could be convened later this month. A minimum 15-day notice period is required to convene a Council meeting.

The 12 percent GST slab typically covers items widely used by middle and lower-income households that are not classified as absolute essentials (which fall under 0 percent or 5 percent). The list of commonly used goods and services currently under the 12 percent GST slab includes:

• Tooth powder
• Sanitary napkins (related feminine hygiene items may still be at 12 percent, though sanitary napkins themselves are now 0 percent)
• Hair oil (some categories)
• Soaps (some categories)
• Toothpaste (some branded variants)
• Umbrellas
• Sewing machines
• Water filters and purifiers (non-electric types)
• Pressure cookers
• Cookware and utensils made of aluminium, steel (some categories)
• Electric irons
• Water heaters (geysers)
• Vacuum cleaners (low-capacity, non-commercial)
• Washing machines (small capacity)
• Bicycles
• Carriages for disabled persons
• Public transport vehicles (when sold, not for fare)
• Readymade garments (priced above ₹1,000)
• Footwear priced between ₹500 and ₹1,000
• Most vaccines
• Diagnostic kits for HIV, Hepatitis, TB
• Certain Ayurvedic and Unani medicines
• Exercise books
• Geometry boxes
• Drawing and coloring books
• Maps and globes
• Glazed tiles (basic, non-luxury variants)
• Ready-mix concrete
• Pre-fabricated buildings
• Agricultural equipment like mechanical threshers
• Packaged foods such as condensed milk, frozen vegetables (some variants)
• Solar water heaters