Guwahati. The goods and services tax (GST) will undergo a major revamp, as the GST Council on Friday decided to reduce the GST tax rate on as many as 178 items from 28% to 18%.

In its 23rd meeting here, the council decided to restrict the list of items attracting the highest tax slab of 28% to just 50 items, Bihar deputy chief minister Sushil Kumar Modi told reporters on the sidelight of the council meeting. Describing the decision as “historic”, he also tweeted: “178 items removed from 28% slab in GST. Only demerit & luxury items now in 28% slab.”

Modi said that the council’s decision would have a revenue implication of Rs.20,000 crore. Before the decision of the council, a total of 228 items had been placed under the 28% tax rate under GST.

The items on which tax rate was reduced from 28% to 18% included mass consumed items like shampoo, cosmetic, deodorant, saving and after shave creams, blade, shoe police, chewing gum, chocolates, nutrition drinks, detergent, marble, granite, stove, fire extinguisher, watches and mattress.

The 28% slab has been retained in luxury items like air conditioners, washing machines, and even paints and cement, said Modi. The council also reduced tax rate from 18% to 12% on several items including cotton and jute hand bags and pasta, and 5% on fly ash and fly ash bricks.

Several state finance ministers attended the council meeting.

The council’s decision to reduce tax on several mass consumed items was welcomed by tax experts. According to them, as India has a very high top tax slab of 28%, the council’s decision is the right step in the direction towards making the GST a single-slab tax system in the future from the present four-slab.
After the meeting, the council is expected to offer some tax relief to small and medium enterprises (SMEs) and restaurants.