GST rejig: Tax rate on 178 daily items reduced to 18 per cent from 28 per cent

In the biggest GST rejig yet tax rates on over 200 items ranging from chewing gum to chocolates to beauty products wigs and wrist watches were today cut to provide relief to consumers and businesses amid economic slowdown As many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent while a uniform 5 per cent tax was prescribed for all restaurants both airconditioned and nonAC Finance Minister Arun Jaitley said after the GST Council meeting hereRepresentative ImageCurrently 12 per cent GST on food bill is levied in nonAC restaurants and 18 per cent in airconditioned ones All these got input tax credit a facility to set off tax paid on inputs with final tax Jaitley said the restaurants however did not pass on the input tax credit ITC to customers and so the ITC facility is being withdrawn and a uniform 5 per cent tax is levied on all restaurants without the distinction of AC or nonACRestaurants in starredhotels that charge Rs 7500 or more per day room tariff will be levied 18 per cent GST but ITC is allowed for them Those restaurants in hotels charging less than Rs 7500 room tariff will charge 5 per cent GST but will not get ITC The allpowerful GST Council pruned the list of items in the top 28 per cent Goods and Services Tax GST slab to just 50 from current 228 So only luxury and sins goods are now only in highest tax bracket and items of daily use are shifted to 18 per centAlso tax on wet grinders and armoured vehicles was cut from 28 per cent to 12 per cent he said adding the tax rate on six items was reduced from 18 per cent to 5 per cent on 8 items from 12 per cent to 5 per cent and on six items from 5 per cent to nilChewing gum chocolates coffee custard powder marble and granite dental hygiene products polishes and creams sanitary ware leather clothing artificial fur wigs cookers stoves aftershave deodorant detergent and washing power razors and blades cutlery storage water heater batteries goggles wrist watches and mattress are among theproducts on which tax rate has been cut from 28 per cent to 18 per centThe top tax rate is now restricted to luxury and demerit goods like pan masala aerated water and beverages cigars and cigarettes tobacco products cement paints perfumes ACs dish washing machine washing machine refrigerators vacuum cleaners cars and twowheelers aircraft and yachtItems on which tax rate has been cut from 28 per cent to 18 per cent include wire and cables furniture mattress trunk suitcase detergents shampoos hair cream hair dyes make up fans lamp rubber tubes and microscope Tax rate on condensed mil refined sugar pasta curry paste diabetic food medicial grade oxygen printing inkhand bags hats spectacles frame and bamboocane furniture has been cut from 18 per cent to 12 per centThat on puffed rice chikki flour of potatoes chutney power fly sulphur recovered in refining crude and fly ash to 6 per cent from 18 per cent Guar meal hop cone certain dried vegetables unworked coconut shell and fish would attract nil GST tax as against 5 per cent nowTax on idli dosa batter finished leather coir fishing net worn clothing and desiccated coconut has been cut to 5 per cent from 12 per cent Consumers will be benefited by lower prices as most of the taxable items are in the 5 per cent 12 per cent or 18 per cent slabs Jaitley saidThe cut in tax will cost Rs 20000 crore in revenues annually Bihar Deputy Chief Minister Sushil Kumar Modi said Launched on July 1 the GST weaved 29 states into a single market with one tax rate but while traders and small business complained of increased compliance burden voices of dissent rose on high tax rate on some common use goods With economy growing by its slowest pace since Narendra Modi government came to power the panicstricken govt has no option but to concede demands for change in the tax former Finance Minister P Chidambaram said on Twitter todayIn ease compliance burden the Council relaxed the return filing criteria and also lowered the penalties for late filing As part of efforts to rationalise GST structure the Council has been reviewing rates from time to time In the last 3 meetings we have been systematically looking at 28 per cent tax bracket and rationalising certain items out of that bracket into lesser categories mostly 18 per cent or even less Jaitley saidGST tax slabs of 5 12 18 and 28 per cent were decided going by the principle of fitting each item into a category most close to cumulative preGST taxes Optically some items should not have been in 28 per cent despite being in old regime Secondly some items manufactured by small entities had excise exemption he said adding in the last meetings 3040 items have been taken out of 28 per cent bracketBipin Sapra Tax Partner EY India said While the reduction of rates would substantially reduce the prices of a number of commodities however the government may need to balance the revenue considerations too Krishan Arora Partner Grant Thornton India LLP said the decision of GST Council on pruning of the 28 slab list would be a welcome move for many industries in mass consumption spaceIn certain cases it is also likely to bring down the total tax impact even lower than earlier regime which would be a big relief to the industry as well as consumers Rationalisation exercise of tax slabs needs to be carried out comprehensively keeping in mind the significance of the industry and the overall tax incidence under earlier regimeArora saidVishal Raheja of Taxmann described the move as great step and said In future we may expect that Government will further slash tax rates by moving from 4tier tax slabs to lesser slabs or even single GST rate Abhishek A Rastogi of Khaitan amp Co said while it was expected that there will be rate cuts it was never expected that the list will be trimmed down so significantlyWith the rate reduction on a plethora of products the next step of the government should be to ensure that the benefit of the rate reduction goes to the consumers he said It appears that after this mass rate reduction various antiprofiteering problems may kickoff for businesses which would not pass on the benefit to the consumers