A group of ministers (GoM) has recommended significant changes to the Goods and Services Tax (GST) structure for 150 goods and services, including textiles. Particularly, the tax rate on tobacco and related products and aerated drinks is expected to increase from the current 28% to 35%.
For textiles, the GoM has proposed a tiered tax structure:
- A 5% GST for textile items priced up to ₹1,500.
- An 18% GST for products priced between ₹1,500 and ₹10,000.
- A 28% GST for textiles priced above ₹10,000, aligning them with luxury goods.
Currently, textiles priced below ₹1,000 attract a 5% tax, while those above ₹1,000 are taxed at 12%.
Additionally, the GoM has recommended an increase in the GST rate for wristwatches priced above ₹25,000 from 18% to 28%, and for shoes costing above ₹15,000, the tax rate will rise from 18% to 28%.
In another significant recommendation, the GoM has proposed reducing the GST on exercise notebooks from 12% to 5%.
Regarding health insurance, the GoM has suggested exempting health insurance policies with coverage up to ₹5 lakh from GST and reducing the existing GST rate of 18% to 5% rate for policies covering amounts above ₹5 lakh.
| PROPASAL | Impact on industry | Companies which could be affected |
| Decrease GST 18% to 5% | Insurance(Positive) | ICICI Lombard, Niva Bupa |
| Raise GST from 28% to 35% | Beverage(Negative) | Varun Beverages |
| Raise GST from 28% to 35% | Cigarettes(Negative) | ITC, Godrej Phillips, VST industries |
| Raise GST from 12% to 18% and 28% | Textiles(Negative) | Page industries. Vedant Fashions |
| Raise GST from 18% to 28% | Shoes(Negative) | Metro Brands |
| Raise GST from 18% to 28% | Watches(Negative) | Titan, Ethos |
Impact-
The government’s decision to reduce GST on essential items is intended to enhance the affordability of low-cost products. In contrast, the increased taxes on textiles, luxury goods, cigarettes, and related products are expected to contribute to higher government revenue. IF GST rates are revised in insurance sector, it could lead to high penetration level for insurance products which is very low in India. It would further encourage us to take insurance products once GST rates are revised.