Budget may see tax on luxury goods go up; new cess to fund Covid testing, vaccination not ruled out

Official sources said that any decision on increasing or decreasing taxes will solely depend on the pattern of their consumption

Growing luxury goods sales even during the pandemic may prompt the government to up GST rates or levy additional cess on such items in the upcoming Union Budget. At the same time, GST rates on certain goods of mass consumption whose demand has declined in the pandemic may see a downward revision.

While data on sales of luxury residential properties, high-end cars, gems and jewellery and import of valuables has seen a significant increase amid the Covid waves, that on two-wheelers and other essential of mid-segment household consumption has seen a decease.

Official sources told DH that any decision on increasing or decreasing taxes will solely depend on the pattern of their consumption. "The government is closely watching the trend," they said.

Finance Minister Nirmala Sitharaman is due to present the Budget on February 1. While the pandemic has helped shoot up wealth of Indian billionaires, there has been continued challenges on the consumption expenditure of other households and small businesses, especially in the unorganised sector.

The government may therefore reduce the GST rates on items of mass consumption and fast-moving consumer goods in the Budget in order to support households whose inflationary expectations are on the rise, an official said on the condition of anonymity.

Though GST rate rationalisation is done throughout the year through the GST Council, the government does, through amendment in the Finance Bill, increase or decrease various duties, which have an impact on final costs of goods. It is expected that customs and central excise duties will see major amendments to support the "Atmanirbhar Bharat" initiative.

According to another official, there could be the imposition of a new cess on super-luxury goods to finance Covid testing and vaccine budget.

Data from real estate consultancy firm Anarock shows that the share of luxury housing sales as part of total residential sales rose to 12 per cent in the first nine months of 2021 compared to 7 per cent in pre-Covid period in 2019. DLF saw record demand and sales of its super-luxury housing projects last year.

German carmaker BMW Group sold 8,876 cars and 5,191 high-end bikes in 2021. Rival Audi witnessed a two-fold jump in retail sales last year.

India's gold imports in 2020-21 touched $38 billion, the highest in the last five years.

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