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

Press Trust of India  |  Guwahati 

In the biggest rejig yet, 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 bracket of 28 per cent to 18 per cent, while a uniform 5 per cent was prescribed for all restaurants, both air- conditioned and non-AC, Minister said after the Council meeting here.


Currently, 12 per cent on food bill is levied in non-AC restaurants and 18 per cent in air-conditioned ones. All these got input credit, a facility to set off paid on inputs with final

Jaitley said the restaurants, however, did not pass on the input credit (ITC) to customers and so the facility is being withdrawn and a uniform 5 per cent is levied on all restaurants without the distinction of AC or non-AC.

Restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 per cent but is allowed for them. Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 per cent but will not get

The all-powerful Council pruned the list of items in the top 28 per cent Goods and Services (GST) slab to just 50 from current 228. So, only luxury and sins goods are now only in highest bracket and items of daily use are shifted to 18 per cent.

Also, on wet grinders and armoured vehicles was cut from 28 per cent to 12 per cent, he said, adding the 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 nil.

Chewing gum, chocolates, coffee, custard powder, marble and granite, dental hygiene products, polishes and creams, sanitary ware, leather clothing, artificial fur, wigs, cookers, stoves, after-shave, deodorant, detergent and washing power, razors and blades, cutlery, storage water heater, batteries, goggles, wrist watches and mattress are among the products on which rate has been cut from 28 per cent to 18 per cent.

The top 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 two-wheelers, aircraft and yacht.

Items on which 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.

rate on condensed mil, refined sugar, pasta curry paste, diabetic food, medicial grade oxygen, printing ink, hand bags, hats, spectacles frame and bamboo/cane furniture has been cut from 18 per cent to 12 per cent.

That 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 as against 5 per cent now.

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 said.

The cut in will cost Rs 20,000 crore in revenues annually, Bihar Deputy Chief Minister Sushil Kumar Modi said.

Launched on July 1, the weaved 29 states into a single market with one rate but while traders and small business complained of increased compliance burden, voices of dissent rose on high rate on some common use goods.

With economy growing by its slowest pace since Narendra Modi government came to power, the "panic-stricken govt has no option but to concede demands for change" in the tax, former Minister P Chidambaram, said on Twitter today.

In ease compliance burden, the Council relaxed the return filing criteria and also lowered the penalties for late filing.

"As part of efforts to rationalise 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 bracket and rationalising certain items out of that bracket into lesser categories, mostly 18 per cent or even less," Jaitley said.

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 pre-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 30-40 items have been taken out of 28 per cent bracket.

Bipin Sapra, 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 Council on pruning of the 28 slab list would be a welcome move for many industries in mass consumption space.

In certain cases, it is also likely to bring down the total impact even lower than earlier regime which would be a big relief to the industry as well as consumers.

Rationalisation exercise of slabs needs to be carried out comprehensively keeping in mind the significance of the industry and the overall incidence under earlier regime, Arora said.

Vishal Raheja of Taxmann described the move as "great step" and said, "In future, we may expect that Government will further slash rates by moving from 4-tier slabs to lesser slabs or even single rate".

Abhishek A Rastogi of Khaitan & Co said while it was expected that there will be rate cuts, it was never expected that the list will be trimmed down so significantly.

"With 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 anti- profiteering problems may kickoff for businesses which would not pass on the benefit to the consumers.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, November 10 2017. 20:42 IST
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