GST Restructuring: Unpacking the Surprising Tax Decisions

The government's recent GST restructuring has left industry insiders and analysts perplexed as detergents and cosmetics remain under an 18% tax rate, offering no financial relief to households for these essential items.

The GST Council's decision, part of an initiative to boost consumer spending, introduces a new dual-slab system—5% and 18%—compared to the previous four slabs. Effective from September 22, this move sees a reduction in taxes on common FMCG items like hair oil and soap, moving them to a lower 5% slab. However, detergents, characterized as a household necessity, did not receive a similar tax cut.

Experts argue that lowering detergent taxes could significantly benefit lower- and middle-income families. Harpreet Singh of Deloitte India emphasizes detergents' essential nature for hygiene. Despite the cut in GST on personal care products, the beauty and personal care market remains robust, with prospects for growth still strong due to rising demand among Gen Z and millennials, even amidst no tax changes for detergents and cosmetics.