The Group of Ministers (GoM) on GST rate rationalisation, led by Bihar Deputy Chief Minister Samrat Chaudhary, has proposed significant changes to the Goods and Services Tax (GST) structure for 2024. These recommendations, revealed on December 2, primarily focus on readymade garments and sin goods, alongside adjustments for 148 items to refine the GST framework.

Proposed GST Rates for Readymade Garments

As per the proposal:

• Readymade garments costing up to ₹1,500 will attract a 5% GST.
• Garments priced between ₹1,500 and ₹10,000 will attract an 18% GST.
• For garments priced above ₹10,000, a 28% GST will apply.

This new tax structure is designed to bring clarity to the taxation of garments, aligning with consumer affordability and the luxury value of higher-priced items.

Hike in GST for Sin Goods

The GoM has also recommended increasing the GST rate on sin goods like aerated beverages, cigarettes, and tobacco products from 28% to 35%. This is aimed at discouraging consumption while increasing government revenue.

GST Council to Deliberate

These recommendations will be reviewed by the GST Council, chaired by the Union Finance Minister, on December 21. The council will take a final decision on implementing the proposed changes.

Current GST Framework

India's GST system operates under a four-tier tax structure with slabs at 5%, 12%, 18%, and 28%:

• Essential items are taxed at the lowest slab or are exempt.
• Luxury and demerit goods, such as cars and aerated beverages, attract the highest 28% slab, often with an additional cess.

The GoM’s recommendations aim to streamline the tax system further, ensuring simplicity and fairness.

Additional Highlights

The GoM's comprehensive review includes tax rate tweaks for 148 items, addressing both consumer goods and services. These changes are expected to balance consumer affordability with government revenue needs.

Key Impacts

1. Enhanced Revenue Generation:
   Higher taxes on sin goods like tobacco and aerated drinks will bolster government revenues.

2. Affordability in Focus:
   Differentiated tax rates for readymade garments ensure affordability for the masses while levying higher taxes on luxury garments.

3. Streamlined GST Framework:
   Proposals seek to simplify GST compliance, benefiting both consumers and businesses.

These proposed reforms will have far-reaching effects on India’s tax system. Businesses and consumers alike are advised to stay updated on the developments.

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