Godrej Group air-conditioning units are seen at an electronics store in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

GST Council May Cut Tax Rate On Air Conditioners, Digital Cameras

Commonly used items such as air conditioners, and digital cameras may be removed from the 28-percent bracket of the goods and services tax at the GST Council today, according to two people with direct knowledge of the matter.

The agenda note mentions tweaking of rates and rationalisation, said Kerala Finance Minister Thomas Isaac, before entering the meeting. He did clarify that reducing the tax rate on cement is not part of the listed agenda. There is serious proposal regarding reducing bus contract service tax to a lower limit without Input Tax Credit (ITC). One has to ensure that the change proposed is revenue neutral, he added.

About 12-14 items that are currently taxed at 28 percent will be brought to the 18 percent tax slab in phases, the people said on condition of anonymity as they aren’t authorised to talk to the media. The reduction is expected to be done in two to three phases once revenue from GST stabilises as the rate cut would result in the government taking a hit of over Rs 20,000 crore a year, the people cited earlier said.

The government intends to simplify the GST with Prime Minister Narendra Modi announcing on Dec. 18 that 99 percent of items will be fall in the sub-18 percent GST slab.

The council is also expected to reduce GST on items such as computer monitors of screen size up to 68 cm, in line with the tax rate cut on television sets of the same size announced in July. The council will also consider reducing tax on power banks to 18 percent. States like West Bengal have sought lower GST on cement as it will lead to a multiplier effect in the form of increased construction activity.

Other items on which GST may be cut:

  • Videogame consoles
  • Road tractors and semi-trailers
  • Dishwashers
  • Tyres
  • Video-camera recorders
  • Mopeds
  • Chassis-fitted engines

Any rate reduction will be a cheer for consumers and will help in increasing sales for companies, said Sumit Lunker, indirect tax partner at PwC India. “Only increase in sales volume for businesses will aid GST revenue,” Lunker said, adding increase in compliance as a result of a rate cut has already been factored.