Rate rationalisation exercise: Luxe bags, cosmetic treatments may be moved to 28% GST Slab

New Delhi: As many as 58 goods and 24 services, such as pricey handbags and sunglasses and certain cosmetic procedures could be moved to the 28% GST slab from 18% or 12% as part of a rate rationalisation exercise being deliberated upon by a group of ministers (GoM) tasked by the GST Council, people familiar with the matter said.

The goods and services that could be moved to the highest GST slab include cosmetic procedures for aesthetics, Botox treatment, nail and tattoo parlours, luxury spa services, super-luxury salon services, handbags and sunglasses priced above ₹10,000, pens costing more than ₹5,000, bicycles above ₹50,000 and cufflinks above a certain price, they said.

The GoM looking into rate rationalisation, headed by Bihar deputy chief minister Samrat Chaudhary, will meet again before it submits its final report to the GST Council in November. A final decision on the changes will be made by the council.

The group had met last week and is veering around to the view that luxury goods need to be redefined. A officials’ panel, which looks at the fitment of items under the GST, is separately working on selection of items and the price caps.

The GoM is of the view that the proposed changes should be implemented in phases and the selected products moved to higher slabs gradually. An official said 10% of items from the 18% slab and 5% from the 12% slab could be shifted to 28% completely or beyond a certain level of sale price to be worked out by the fitment committee.However, items of common man use will not be shifted. “The idea is to move products and services that fall within the luxury category but still figure in the lower tax bracket,” the official told ET.The official added that this was because of the large range in pricing for some products.

For instance, the price of normal pens starts from ₹2 and may go up to ₹70,000-80,000, the official said. “If a person is paying ₹70,000 for a pen, he will not mind paying 28% GST and at this price it becomes luxury.”

Currently there are four GST slabs of 5%, 12%, 18% and 28%

This exercise may add more items to the 28% slab and officials said this may boost GST collections significantly. But it is too early to determine the revenue implication, they said.

According to a report titled “The rise of ‘Affluent India‘” by Goldman Sachs Research, the number of affluent consumers in India will increase from around 60 million in 2023 to 100 million by 2027.