GST rates announced; see what get costlier, cheaper  

May 19, 2017, 8:44 am
GST rates announced; see what get costlier, cheaper  
BUSINESS NEWS
BUSINESS NEWS
GST rates announced; see what get costlier, cheaper  

GST rates announced; see what get costlier, cheaper  

As political consensus growing for a possible 1 July roll out of India’s biggest tax reforms since Independence, the Goods and Services Tax (GST), the GST Council on Thursday decided the tax rates for 1,211 items, a majority kept at 18 percent.

Rates of some products like gold and beedi remained undecided, most food items including wheat, rice and milk also exempted from the Goods and Services Tax (GST.

The Council did not take any decision on services tax rates. The two-day meeting will take up the exemption of essential services on Friday.

“There is no increase in taxes of the items considered today. In fact, for many of them, taxes have come down,” Finance Minister Arun Jaitley told the media in Srinagar after the first day of the GST Council meet on Thursday.

The products which are used on a daily basis such as foodgrains, hair oil, soaps and toothpaste as also electricity will cost less from 1 July. While the Council fitted all but six items in 5, 12, 18 or 28 percent tax brackets, cars will attract the top rate as also a cess.

According to sources, small petrol and diesel cars will be taxed at 28 percent with small petrol cars attracting a cess of 1 percent and small diesel cars 3 percent. Luxury cars will attract a 15 percent cess in addition to 28 percent GST. 350 cc bikes will attract a cess of 3 percent.

While meat, fresh vegetables, honey, jaggery, prasadam, kumkum, bindi, pappad and contraceptives have been exempt from GST levy, items like pizza bread, sevaiya, condensed milk, frozen vegetables will attract 5 percent levy, as per the items list put on.

Revenue Secretary Hasmukh Adhia said that an overwhelming 81 percent of items will attract tax of 18 percent or below. Only 19 percent of items will be taxed at the highest rate of 28 percent, he said.

Aerated drinks too have been put in the 28 percent bracket along with a cess of 12 percent, but the rates for bidis along with gold, footwear, bidi, biscuits and agriculture equipment would be decided later..

The Finance Minister said food items, including cereals, will become cheaper as they have been kept under the exempt category to which milk is also proposed to be added. However, the fitment of packed and branded food is yet to be decided.

Jaitley said the rates on the remaining items will be decided in the Council’s meeting on Friday.

“The Council may meet again if final rates are not decided tomorrow (Friday),” the minister added.

Jaitley said that while the overall basket of taxes will see a reduction, he hoped for greater tax buoyancy because of greater efficiency and less tax evasion.

“On many commodities there would be reduction because of the cascading effect, but we are banking on the hope that because of a better tax system and less evasion there would be tax buoyancy,” he added.

Items like hair oil, toothpaste and soaps, which are now taxed at 28 percent, will be taxed at 18 percent under GST.

Sugar, tea, coffee (except instant), edible oil and coal will attract 5 percent tax. Coal is currently taxed at 11.69 percent.

Air-conditioners and refrigerators will come under the 28 percent tax slab, while life saving drugs have been kept at 5 percent rate.

In a major measure of support to industry, the rate for capital goods, as well as industrial and intermediate items have been set at 18 percent.

Around 400 items are currently exempt from excise and VAT under the existing indirect tax regime.

With the government announcing that 7 percent of items will remain under the exempt category, the number of items which enjoy zero per cent tax will come down drastically.

According to sources, Jaitley asked the states during the meeting to keep exemptions to the bare minimum. “There cannot be 300 items in the exemption list,” he said.

Jaitley also announced that seven rules for GST have been decided while the Council will take up the ones on transition and returns on Friday.

Commenting on the GST Council's deliberations, a senior tax analyst said the rates announced were along expected lines.

“However, it seems a lot of work is yet to be done. Exemptions and issues related to reverse charge mechanism have not been finalised, and looks doubtful that it will be done in a day,” Taxmann.com Senior Consultant V.S Datey said.

“Thus the chances of introducing GST by 1 July appears doubtful,” he added.