GST Council: The government decided on Monday to raise taxes on harmful items such as aerated drinks, cigarettes, tobacco, and related products to 35% from the current 28%, in addition to rationalizing GST rates, an official said. The Bihar Deputy Chief Minister, Samrat Choudhary, leads the rate rationalisation group of ministers (GoM), who have also decided to rationalize the tax rate on apparel.

The decision stipulates that readymade garments priced up to Rs. 1,500 will be subject to a 5% GST, while garments priced between Rs. 1,500 and Rs. 10,000 will be subject to an 18% GST. Garments priced over Rs. 10,000 will be subject to a 28% tax. Overall, the government will propose to the GST Council to change the tax rates on 148 items to rationalize the rates. According to an official, the net revenue impact will be positive.

It is anticipated that the GST Council, led by the Union Finance Minister and comprising his state counterparts, will meet on December 21st to discuss the issue. The council will take the final decision on the GST rate changes.

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The government agreed to propose a special rate of 35% on tobacco and accessories and aerated drinks, the official said. The 4-tier tax slab of 5, 12, 18, and 28 per cent would continue, and 35 per cent is the new rate suggested by the government.

GST currently has a four-tier tax structure with slabs of 5, 12, 18, and 28 per cent.

Under GST, essential commodities are either exempted or taxed at the lowest slab, while luxury and demerit goods attract the highest slab. Luxury goods such as cars, washing machines, aerated water, and tobacco products attract a cess above the maximum slab of 28%.

According to the official, the government has completed its report on rate rationalisation, which will be presented to the council on Monday.

The council would now decide if there is further room for rate rationalisation and could decide to retain the government agency so that the rationalisation exercise may continue over time, the official stated.

In its last meeting in October, the government proposed lowering the GST on packaged drinking water of 20 litres and above from 18% to 5%.
It also proposed to the council to reduce GST on bicycles priced under Rs. 10,000 from 12% to 5%.

The GST on exercise books will also be reduced from 12% to 5%. The government has also proposed to raise the GST on shoes above Rs. 15,000 per pair from 18% to 28%. In its previous meeting on October 19th, it proposed raisinge the GST on watches above Rs. 25,000 from 18% to 28%.

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(With Agencies Inputs)