China is cutting down or eliminating tax on all cosmetic products, the finance ministry announced on Friday, the country's latest move to accelerate the transition toward a more consumption-led economy.

Under the new law, taxes for non-luxury cosmetic items will be waived, while tax rate for high-end products, >10 yuan ($1.50) per mL or >15 yuan ($2.25) per piece, will be cut into half, according to Singapore Business. Previously, all cosmetic products in China are subject to a 30 percent consumption tax rate.

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Although the consumption tax reduction will help improve demand for domestic products, Jeffries analyst Jessie Guo noted it is unlikely to have a major or immediate impact since other tariffs like the 10 percent import tax and 17 percent VAT remain unchanged, Reuters reported.

"We believe the reduction in consumption tax would help to improve demand for imported cosmetic products moderately, and unlikely to be significant as the price differential between China and overseas cosmetic products remains high due to other taxes (import tax, VAT) and markup," Jefferies said in a report.

China's Finance Ministry has been considering a consumer tax overhaul. Sources told Bloomberg that the ministry supports tax reduction for cheaper cosmetics and toiletries but tax increase on alcohol and tobacco taxes.

The changes are deemed necessary to keep up with the transitioning consumption trends were products used to be seen as luxurious are not every day items, thanks to China's growing middle class.

Last year, China also cut down import tax on several products including skin car and shoes to "push forward structural reforms."

Tagstax, consumption tax, cosmetics, cosmetics tax, china, china tax, VAT, import tax