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In a massive relief for consumers, the Goods and Services Tax (GST) Council on Friday decided to slash tax rate on a wide range of mass use items– ranging from chewing gums to detergents–to 18 per cent from existing 28 per cent.
“178 items have been moved from 28 per cent to 18 per cent GST slab, changes will be applicable from November 15,” Union Finance Minister Arun Jaitley was quoted as saying by ANI.
Detergent, marble floorings, toiletries are among items that have been shifted to 18 per cent tax bracket from 28 per cent, said Jaitley while divulging more details.
On 13 items, the tax rates have been reduced from 18 per cent to 12 per cent, while tax rates have been slashed to 5 per cent on five items from 18 per cent. Besides, the rates on six items have been lowered to zero from 5 per cent, added Jaitley.
Jaitley further said restaurant industry will not get input tax credit and added that tax rate will be 5 per cent uniform for all AC or non-AC restaurants. Restaurants in starred-hotels will charge 18 per cent tax with input tax credit, those in lower category hotels to charge 5 per cent GST without ITC, Jaitley said.
Earlier, Bihar Deputy Chief Minister Sushil Kumar Modi said the all-powerful GST council cut down the list of items attracting the top 28 per cent tax rate to just 50 from 227 previously.
“There were 227 items in the 28 per cent slab. The fitment committee had recommended that it should be pruned to 62 items. But the GST Council has further pruned 12 more items,” Modi told reporters.
The Council had been facing widespread criticism from opposition-ruled states over keeping mass used goods in the 28 per cent slab which was meant for luxury and de-merit goods. The GST, which was implemented from July 1, has five tax slabs of 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Among the items that will now attract 18 per cent tax rate include all types of chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoo deodorants, washing powder detergent and granite and marble, Modi said. “There was unanimity that in 28 per cent category there should be only sin and demerit goods,” he said, adding that paints and cement have been retained in the 28 per cent bracket.
“Luxury goods like washing machines and air conditioners have been retained at 28 per cent.”
According to Sushil Modi, the decision taken by the GST Council will have a revenue implication of Rs 20,000 crore annually. “There is consensus that slowly 28 per cent slab should be brought to 18 per cent. But it will take some time because it has a big revenue implication,” he said.
Slamming the central government on revised tax rates, the Congress said the populist changes have been made because of the forthcoming assembly elections in Gujarat.
Reflecting on the government’s decision to trim GST rates on items, Mayuresh Joshi, Fund Manager of Angel Broking said it would have an anti-inflationary impact on the economy and would compensate for the inflation impact of higher oil prices.
“While the GST Council has broadly discussed about softening of procedures, there has been no discussion or specific announcement about the proposal to shift GST reporting and filing from monthly to quarterly. Markets were also expecting more changes in the Composition Scheme but that was also not taken up. Even the issue of including Petrol and Diesel in the GST ambit has been put off to a future date. This massive pruning of GST rates should have an anti-inflationary impact on the economy and should compensate for the inflation impact of higher oil prices,” Joshi said.
“The GST Council has ensured that only genuine “Sin Products” will remain in the 28% category. The rate cut will result in a revenue loss of Rs.20,000 crore for the government but the government hopes to recover these losses through better compliance. The items where the rate of GST was cut from 28% to 18% include items of mass consumption like chewing gum, chocolate, after-shave lotion, beauty products, detergent and marble products. However, certain products like air conditioners, washing machines, paints and cement have been retained in the 28% bracket,” he said.
With PTI inputs
