The Goods and Services Tax (GST) Council is likely to convene a meeting within the next 15 days to consider reducing the indirect tax on air and water purifiers to 5 per cent, amid growing public health concerns, people privy to the development said.
The Council — which is mandated to meet at least once in a quarter — last met in September to announce major rate rejig. Any reduction on purifiers would also need consensus among state finance ministers.
The Council is expected to examine a proposal to bring down the GST rate on these products from 18 percent to 5 per cent by reclassifying them as essential goods rather than discretionary consumer items, the people cited above said.
The move is being discussed against the backdrop of deteriorating air quality across large swathes of the country and uneven access to safe drinking water.
An email sent by Business Standard to the finance ministry and the GST Council Secretariat seeking clarity on the timing of the meeting and the scope of the rate rationalisation did not elicit response till the time of going to press.
Apart from air and water purifiers, the Council may also deliberate on cutting GST on certain insecticides used for domestic purposes and rodenticides (used to kill rats, mice etc.), which currently attract an 18 per cent tax rate.
These products could also be shifted to the 5 per cent slab, according to sources aware of the discussions.
It also comes against the backdrop of an ongoing hearing on the matter in the Delhi High Court.
On December 24, the high court asked the Centre to convene a GST Council meeting, virtually if not physically, at the earliest to consider cutting or abolishing GST on air purifiers, citing worsening air quality in the National Capital Region. The Centre, however, told the court that such a move could “open a Pandora’s box”.
Tax experts, meanwhile, caution that a reduction in the output GST rate may not translate into a proportionate price cut unless input tax rates are also rationalised, as higher taxes on components could lead to input tax credit accumulation.
“The eventual impact on consumer prices would depend on the input tax credit available with manufacturers. If GST rates on inputs remain elevated, the benefit of a lower output tax could be partially offset,” an tax expert said.
Political demands have also gathered pace. In November, former Delhi chief minister Arvind Kejriwal urged the Centre to abolish GST on air and water purifiers. Congress too raised the issue during the just concluded Parliament session.
Industry and trade bodies have separately made representations to the government calling for the rate to be cut to 5 per cent.
Industry representatives argued that high GST rates on such products undermine public health objectives and inflate retail prices.
Reinforcing these demands, the Parliamentary Standing Committee on Science & Technology, Environment, Forests and Climate Change recommended in its December report that GST on air and water purifiers and their consumable parts should be slashed or abolished, noting that citizens should not be penalised for attempting to secure clean air and safe drinking water.
