GST Council Meeting

New Delhi. The 56th GST Council meet has come as a major saviour for common people. The meet chaired by Finance Minister Nirmala Sitharaman agreed to certain key amendments that would directly affect household expenses. Now, footwear and clothing with a maximum price of ₹2,500 would come in the 5% GST slab. So far, only products with a maximum of ₹1,000 used to cost 5% GST while products that cost over that amount were taxed with GST at 12%.

In addition, the GST Council has scrapped the 12% and 28% slabs entirely. Now, only two rates — 5% and 18% will remain. This move is expected to reduce consumer burden and give a strong push to the apparel and footwear industry.

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Footwear and Apparel up to ₹2,500 Will Now Be Cheaper

Until now, footwear and clothing items priced up to ₹1,000 were taxed at 5%, while those above the threshold were taxed at 12%. The Council has raised the ceiling to ₹2,500.

This implies that middle- and low-middle-income consumers would purchase branded and semi-branded clothing and shoes at reduced prices. Market analysts think that such a move would give a fillip to the retail trade while it heads towards its busiest period before Diwali and marriage season when maximum demand for clothing and footwear emerges.

What Does It Mean 12% and 28% Slabs Gone?

To simplify the GST structure, the Council has decided to abolish the 12% and 28% slabs. Products that fall in the 12% category will therefore be transferred to either 5% or 18%. Products from 28% category would move into 18% category. With this, GST would now function with only two slabs: 5% and 18%. This will not only streamline the tax system for people to understand better but also prevent tax evasion, claims the government.

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Which products would be impacted in GST Council Meet?

The changes in GST rates will directly impact several essential and consumer goods that would cost cheaper:

• Up to ₹2,500 for clothing and footwear
• Small household appliances
• Entry-level consumer electronics such as TVs and ACs
• Two-wheelers and lower mid-range cars (selected models)
• Things that might become more expensive:
• Luxury cars and premium cycles
• High-end electronic gadgets
• Tobacco products, alcohol, and cigarettes (the Council could place cess on these)
• Significant Relief for Small Enterprises

The meeting was not only consumer-oriented and many steps were announced to relieve small businesses of their burden. Registration has also been made simpler for low-risk businesses, from 7 to just 3 days. Pre-filled Returns: The authorities intend to roll out pre-filled returns to simplify compliance.

Quicker Refunds In GST

Sectors such as textiles, chemicals, fertiliser, and pharmaceuticals would get refunds within 7 days. These procedures are of high importance for MSMEs that suffer from liquidity problems because of late refunds.

States Express Concerns Over Revenue Loss but not all states are supportive of the changes to that extent. Jammu & Kashmir Chief Minister Omar Abdullah was apprehensive that adoption of the new GST model would reduce union territory’s revenue by 10-12%, worsening its financials further.

Likewise, Jharkhand Finance Minister Radha Krishna Kishore stated that the state would suffer a loss of up to ₹2,000 crore in case of implementation of the reforms. He further said that if the losses are made good by the Centre, Jharkhand has no problem with the reform implementation.

The opposition-ruled states such as Himachal Pradesh, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal also asked for ensuring Centre to compensate for losses of revenue from GST restructuring.

Tied to PM Modi’s Independence Day Announcement, It must be mentioned that Prime Minister Narendra Modi, in his Red Fort Independence Day address, had also said that significant GST reform was in pipeline for common people’s welfare.

The Finance Ministry had thereafter suggested that these four slabs (5%, 12%, 18%, 28%) be brought down to two 5% and 18%. The 56th GST Council meeting was the first official deliberation on that recommendation, which has now got its approval.

The new system is likely to be in place before Diwali, offering huge respite to consumers ahead of the festive season.

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Industry Response

Textile Sector: The Clothing Manufacturers Association of India (CMAI) welcomed the decision, saying it will benefit mid-range brands and retailers, boost consumption, and generate employment.

Shoes Trade: The Council for Leather Exports welcomed the move, saying it would boost sales in the domestic market and enhance competitiveness in export markets.

Auto Industry: Auto manufacturers indicated that starter two- and four-wheelers would gain from the 18% slab, giving a demand push. Luxury cars might witness adverse effects.

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How Consumers Will Benefit

Affordable Clothing and Footwear: Labeled clothes and shoes that were taxed up to ₹2,500 would now be taxed with just 5% GST. Lower Inflation Pressure: Prices of household products and small appliances are expected to drop. Festive Season Savings: Families will benefit from reduced costs during Diwali, Durga Puja, and wedding shopping.

Simplified Tax System: With fewer slabs, compliance will be easier for businesses, and consumers will have more clarity.

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Expert Views

Economists: They think that the reform intends to boost spending and offer a reprieve with growing inflation.

Tax Analysts: Their argument is that fewer slab rates would lead to higher compliance and fewer cases of tax evasion.

Consumer Protection Associations: Although they received the move with enthusiasm, they underline that companies should transmit their gains to end users.

The 56th meeting of the GST Council marks a significant step towards simplifying India’s indirect tax system. By reducing the slabs to just two and lowering the GST on clothing and footwear up to ₹2,500, the government has provided direct relief to the middle class. Yet, challenges remain, particularly regarding states’ concerns about revenue losses. Unless addressed, these issues may hinder smooth implementation. Still, if the reforms are rolled out before Diwali as expected, households across India will feel considerable relief from inflationary pressures.

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Sources : Aajtak & Live Hindustan