GST Council Meet Expectation: Toothpaste, AC, Washing Machine, TV, To Your New House, What Can Get Cheaper?

GST Rate Cut: The 56th GST Council meeting is set to begin on Wednesday, September 3. The two-day meeting, led by Union Finance Minister Nirmala Sitharaman, is likely to discuss the rationalisation of GST tax slabs.

Prime Minister Narendra Modi on 15 August had announced that the Centre will bring next gen GST reforms by early October. The proposed GST rate rationalisation could mark a watershed in India's indirect tax framework and will significantly boost consumption and demand in FMCG, automobile, textile, cement and other sectors, highlighted experts. According to reports, the Centre has proposed to replace the 12% and 28% slabs with 5% and 18% rates, respectively.

The GST rate rationalisation may cause a short-term impact on the Indian government's revenue, but will significantly boost consumer confidence ahead of the beginning of the festive season. As we will get to know about final GST rate cuts after the conclusion of the meeting on Thursday, let's take a look at what is expected from GST rate cut in sectors like agriculture, textile, cement, consumer durables, etc.

GST Rate Cut Expectations For FMCG

People may see a massive rejig in GST on daily use items like toothpaste, umbrellas, sewing machines, and small washing machines, etc.

"Items such as toothpaste, umbrellas, sewing machines, and small washing machines now fall under the 5% merit slab. Meanwhile, high-GST items-like electronics, air conditioners, TVs, small cars, and two-wheelers-will move from the 28% slab to 18%, resulting in nearly a 10% drop in tax burden, likely reducing prices ahead of the festive season," stated Brijesh Gandhi, Partner, NPV & Associates LLP.

GST Rate Cut Expectations In Agriculture Sector

A reduction in tax incidence on agri-inputs, equipment allied products would significantly decrease agricultural cost for farmers and boost rural buying, noted Abhishek Wadekar Founder Chairman, Tradelink International Pvt. Ltd.

"Rationalisation of GST rates on agriculture-commodity items can prove to be a game-changer for the industry. A streamlined GST structure can further release efficiencies in procurement, logistics, and exports, abetting both domestic and foreign trade growth," said Wadeker.

"In agriculture, fertilizers such as urea and DAP may see GST drop from 12% to 5%, lowering cultivation costs and supporting farmer incomes," stated Prabhat Ranjan, Senior Director with Nexdigm consultancy firm.

GST Rate Cut Expected On Textile Sector

The textile sector is currently bearing the brunt of United States' 50% tariffs on Indian items. The GST rate cut proposal could benefit the sector by addressing inverted duty anomalies and improving competitiveness. They can also benefit from a more uniform 5%/18% GST slab structure, according to Ranjan.

GST Rate Cut Expectation For Cement Sector

"Cement, currently taxed at 28%, could shift to 18%, bringing down infrastructure and housing costs and supporting the government's push on affordable housing," added Ranjan.

GST Council Meet Expectations: Would Consumers Actually Benefit From Proposed GST Rate Cut?

Even if the GST rate cuts are announced, it is important or the government to closely monitor whether these benefits are passed on to the consumers. "The anti-profiteering framework will closely monitor whether businesses pass on these benefits transparently to consumers. Industry must proactively address this by recalibrating pricing and ensuring that tax savings are not absorbed in margins but are fairly transmitted in the value chain," explained Prabhat Ranjan.