99% of the items in the 12% bracket will move to 5%, with the remaining moving to 18%

PTI New Delhi

Finance Minister Nirmala Sitharaman will attend a crucial meeting of a state ministerial panel on August 20 to put forth the Centre's proposal for sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items.

The two-day meeting of the Group of Ministers (GoM) on GST rate rationalisation is scheduled on August 20-21 here, sources said. The meet will deliberate on the Centre's proposal for GST reforms of reducing the number of tax slabs in Goods and Services Tax (GST) to two -- 5 and 18 per cent, and a 40 per cent special rate on a select few items.

Sources said apart from the rate rationalisation panel, the two-day meeting would be attended by members from GoMs on compensation cess and also health and life insurance. "The idea is to put forth the Centre's view point behind the GST reform proposal. Although the Centre is not a member of the GoM, Union Finance Minister's presence and her address will give the GoM a better understanding of the idea and thought process behind the Centre's proposal," a source told PTI.

Upcoming GST reforms improve outlook for consumption, demand: MS

An overhaul in GST rate slabs, coupled with support from other measures such as personal income tax cuts, monetary policy easing, signs of pickup in job growth and improving real wages, improve the in outlook for consumption and domestic demand India, according to a report by Morgan Stanley.

Morgan Stanley, in a report dated August 17, said this next-generation reforms should support consumption. "Apart from this, personal income tax cuts, monetary policy easing, and signs of a pickup in job growth and improving real wages should also support consumption in the next few quarters," the report read, authored by economists Upasana Chachra and Bani Gambhir.

18% slab to contribute lion’s share of GST revenue

The 18 per cent tax slab is expected to remain the major contributor to GST revenues if the Centre's proposal for a two-tier GST structure and a special 40 per cent rate is implemented, according to a source.

"The 18 per cent slab will continue to account for a lion's share in the GST revenues as per the Centre's proposal. We expect volumes to go up and a consumption boost which will help improve the GST revenues from the current level," the source said.

‘Centre, States equal stakeholder in GST’

Amid concerns about the revenue impact of the Centre's pro-middle-class 'Next Gen GST' with a proposed two-slab structure, government sources clarified that the Centre is an equal partner in revenue sharing with the states and that its proposal anticipates a revenue boost over time, driven by increased consumption.

GST reduction to help AC makers gain ground

The appliance makers expect a good churn in the festive season, led by the government's proposal to reduce the GST slab on air-conditioners from the current 28 per cent to 18 per cent, which will reduce the price from Rs 1,500 to Rs 2,500 depending on the models.

Moreover, this reduction in price, which has come after the government's recent Income tax cut and repo rate revision, will not only help in increasing penetration of ACs but also premiumisation, where people will buy energy-efficient models due to cost advantages.