Most essential manufactured items likely to attract 5% GST, fertilizer cos may get relief from IDS

Official sources said key essential items such as toothpaste, hair oil, soaps etc are likely to be brought in 5 per cent slab
| Photo Credit:
SRIRAM MA

From readymade garments to movie tickets, all items below a certain threshold are set to cost less as the GST Council is expected to discuss a proposal for rate rationalisation in its meeting on September 3-4. The Council is also expected to discuss the long-pending demand of the fertiliser industry for correcting inverted duty structure.

After Prime Minister Narnedra Modi’s Independence Day announcement about GST 2.0, the Centre proposed two rates (5 and 18 per cent) along with special rate of 40 per cent and continuation of special rates (0.25 per cent, 1 per cent and 3 per cent). The Group of Ministers (GoM) has endorsed this proposal and now it will be placed before the Council meeting. New rates are expected to be in place as early as possible to boost festive buying which is likely to pick up from September 22 (beginning of Navratri)

Official sources said key essential items such as toothpaste, hair oil, soaps etc are likely to be brought in 5 per cent slab. For readymade garments and footwear, there could be two categories based on MRP. Products below ₹2,500 could attract 5 per cent GST as against the existing 12 per cent and those above ₹2,500 may be placed in 18 per cent slab in place of 12 per cent.

According to sources, there is also a proposal to reduce GST on hotel accommodation of less than or equal to ₹7,500 per night to 5 per cent with input tax credit (ITC) from current 12 per cent with ITC. Similarly, cinema hall ticket with price less than ₹100 proposed to be reduced to 5 per cent with ITC from 12 per cent with ITC .

Sources said another key proposal is about hiking rate on some services to 40 per cent (with ITC) from 28 per cent. These include admission to casinos, race clubs, sporting events such as IPL, race club services besides betting, casinos, gambling, horse-racing and lottery.  The Council could also take up a proposal to raise GST rate to 40 per cent from 28 per cent plus compensation cess for station wagons, racing cars, motor vehicles of more than 1,200 cc and 4,000 mm length, aircrafts, helicopters, aeroplanes for personal use and motor cycles with more than 350CC.

Relief for Fertilizer Sector?

Meanwhile, the Council is also expected to take up proposal to correct Inverted Duty Structure (IDS) for the fertilizer sector. IDS refers to higher duty on input and lower duty on output. Fertilizer attracts five per cent GST while key inputs such as ammonia (used in the production of P&K fertilizer) and packaging material attract 18 per cent leading to inverted duty structure.

Although the government gives subsidy on both urea and P&K types of fertilizers, there are different mechanisms for computation and that is the key reason for accumulation of input tax credit and resultant refund. Many of these matters are pending in courts.

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Published on August 28, 2025