Handicrafts are likely to attract zero tax under the proposed Goods and Services Tax (GST) reforms, according to sources. The news comes as investors weigh the potential impact of the government’s incoming proposals in the indirect taxation system. Last week, Prime Minister Narendra Modi announced a “big Diwali gift” for the public ahead of Diwali this year, promising next-generation reforms that will “substantially” reduce taxes under the GST system.
On Monday, his announcement boosted consumption-related stocks on Dalal Street. The PM also said that his government has already begun the GST review by setting up a high-power panel and held discussions with the states.
Meanwhile, sources said that a group of ministers is set to meet on August 20 and 21 to consider aspects such as rate rationalisation, insurance, and compensation cess under the GST reform drive.
This ministerial group is set to deliberate in detail the central proposal, which aims to rework the current GST structure to keep only two main rates: 5 per cent and 18 per cent.
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Handicrafts attract 5-18% GST rate now
Currently, the GST rate on handicrafts varies depending on the specific type of handicraft item, ranging from 5 per cent to 18 per cent.
While metal handicrafts are taxed at 12 per cent, wooden products are taxes at 12-18 per cent, and textile-based items attract a levy of 5 per cent.
The likely removal of GST on the segment is set to lower the prices and possibly spur demand for handicrafts across segments.
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PM Modi promised ‘double Diwali’ gift in form of substantial GST rate cut
“This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen are going to get a very big gift,” said PM from the ramparts of Red Fort in the national capital.
Reiterating his government’s commitment to big reforms in the indirect tax framework introduced in 2017, the PM said that the Centre emphasised the need to review GST rules, having already cut the tax burden on the public over the past eight years.
Next generation GST reforms coming: PM Modi
The Prime Minister also said that his government is working on the next-generation GST reforms.
Describing the upcoming GST changes as a “Diwali gift”, the PM promised to significantly lower the taxes borne by the common man.
“Our MSMEs, our small entrepreneurs, will get a huge benefit,” said the PM, vowing to make a host of everyday items “very cheap” to give “a new boost” to the economy.
