Tax relief of Rs 70,000 crore expected as Centre prepares for elections

THIRUVANANTHAPURAM: In the backdrop of upcoming state assembly elections in Bihar this year and in Kerala, Tamil Nadu, West Bengal, Tripura, and Puducherry next year, the central government is moving to reduce the prices of essential commodities. Significant reductions in taxes on these items are being planned. The existing 12% GST slab may be entirely removed or shifted to the 5% slab.

Although agricultural produce is tax-exempt, fertilizers currently attract an 18% GST, which has contributed to price hikes and a steep rise in farming costs. This tax is expected to be reduced. There is also a possibility of reducing the GST on health insurance schemes commonly used by the middle class from 18% to 12%.

Indications suggest that tax reliefs amounting to Rs 50,000 crore to Rs 70,000 crore may be announced. A final decision will be made at the 56th GST Council meeting scheduled for this month.

During its meeting last December, the GST Council was advised to suggest reforms to the tax structure that would benefit ordinary citizens. A report has been prepared accordingly, and decisions based on it are expected in the upcoming council meeting

Most items under the 12% GST slab are essential goods used by common people. Reducing taxes on these will significantly lower their cost of living. If implemented, this will become one of the most important GST rate reforms since the introduction of the indirect tax regime in 2017.

From clothes to toothpaste
Items that may see tax reductions include textiles, footwear, paper, toothpaste and tooth powder, sewing machines, electric irons, small-capacity washing machines, bicycles, readymade garments, sanitary napkins, hair oils, umbrellas, non-electric water filters and purifiers, pressure cookers, aluminium and steel cookware, low-capacity vacuum cleaners, certain vaccines and packaged dairy products.

Inflation rates in poll-bound states
Puducherry – 8%
Tamil Nadu – 7.2%
Assam – 6.5%
Bihar – 6.37%
Kerala – 5.9%
West Bengal – 5.3%
Tripura – 4.49%
National Average – 3.9%