Toothpaste, Clothes, Shoes May Get Cheaper! Centre Plans Big GST Slash for Middle Class

The central government is planning a significant overhaul of the Goods and Services Tax (GST) structure, with a proposal to either slash the 12 percent GST rate to 5 percent or remove the 12 percent slab entirely. The move, if implemented, is aimed at making essential and daily-use goods more affordable, especially for middle-class and low-income families struggling with rising living costs.

Relief on Essential Items Likely

Most products currently taxed at 12 percent are widely used by households across India. These include common items such as toothpaste, toothbrushes, umbrellas, pressure cookers, kitchen utensils, electric irons, water heaters, washing machines, bicycles, and more. The reclassification of these items into the 5 percent GST slab would directly reduce their prices, resulting in lower monthly expenses for consumers.

According to reports, “the restructuring would target items widely used by middle-class and economically weaker sections such as toothpaste and tooth powder, umbrellas, sewing machines, pressure cookers and kitchen utensils, electric irons, geysers, small-capacity washing machines, bicycles, readymade garments priced over Rs 1,000, footwear priced between Rs 500 and Rs 1,000, stationery items, vaccines, ceramic tiles and agricultural tools, among other things.”

Big Decision Awaited at 56th GST Council Meeting

The final decision on this proposal is expected to be taken during the 56th meeting of the GST Council. The council, chaired by the Union Finance Minister and comprising finance ministers from all states, holds the authority to approve any changes in tax rates. As per norms, the meeting will be held later this month, following a 15-day advance notice.

Finance Minister Nirmala Sitharaman recently hinted at possible rate changes, saying that “the government was actively working towards a more rational structure and considering relief for the middle class on essential items.”

Financial Impact on Government

Implementing the proposal will come at a significant cost to the exchequer. Sources say that the financial impact could be between Rs 40,000 crore and Rs 50,000 crore. However, the government appears ready to bear this burden, hoping that lower tax rates will lead to increased consumption, which in turn could widen the tax base and boost GST collections in the long run.

Officials believe that “lower prices will drive higher sales, ultimately resulting in a tax base and increased long-term GST collections.”

Opposition From Some States

Despite the Centre’s push, not all states are on board. There has been resistance from some states, including Punjab, Kerala, Madhya Pradesh, and West Bengal. As GST is a shared system between the Centre and states, any changes to tax rates must be approved by the GST Council, where every state has voting rights.

So far, the council has only voted once since its inception in 2017, with all other decisions reached through consensus. It remains to be seen whether the Centre can secure agreement on this major structural change.

A Big Restructuring Move Since 2017

If the 12 percent slab is entirely scrapped, goods could be reclassified into either the 5 percent or 18 percent brackets, depending on their use and nature. This would mark one of the most significant changes to the GST system since its rollout in 2017.

As consumers wait for the final call, the proposed GST change is being seen as a major relief step, one that may have both economic and political implications in the coming months.