12-18% GST rate for most products; foodgrain exempted, 5% tax on coal

Most FMCG items to become cheaper; rate for six categories to be fixed today

The Goods and Services Tax (GST) Council, at its meeting in Srinagar on Thursday, approved rates for about 1,200 items, boosting the chances of a July 1 roll-out and also sending a signal to the industry to be ready for the indirect tax regime.

In a bid to ensure that the GST was non-inflationary, the Council, chaired by Union Finance Minister Arun Jaitley and comprising representatives of other states, kept more than 81 per cent of the items in the tax bracket of 18 per cent or lower.

“We have approved rates for 1,211 items… Six categories are yet to be finalised. This will be taken up tomorrow (Friday), along with services,” said Jaitley. 

The complete list of the rates for these items was released late at night. Friday will be the second day of the 14th meeting of the Council. On Thursday, it also approved eight of nine GST rules, sending one to the legal committee for vetting.

Taking into consideration food consumed by the poor, foodgrain and milk have been exempted from taxes. Cereals will be taxed at 5 per cent.

About 60 per cent of the items will be in either the 12 per cent or 18 per cent tax brackets. 

*TV, refrigerator, washing machine, vacuum cleaner, AC; **3% cess for small diesel cars, 1% for small petrol cars and 15% for luxury cars

Only 19 per cent of the items will be in the 28 per cent slab, the highest rate. “Revenue neutrality will be maintained. There is no increase in the tax rate for most items. In fact, for many commodities, the rate has come down as the cascading tax will be lowered,” said Revenue Secretary Hasmukh Adhia. He added evasion would be checked and tax buoyancy would go up. 

Coal will be taxed at 5 per cent, against the current 11.7 per cent, but there will be an additional cess. 
 

Hair oil and toothpaste will be taxed at 18 per cent, lower than the current tax incidence of about 23-24 per cent. Sugar, tea, coffee and edible oil will be taxed at 5 per cent. All capital and intermediate goods will be in the 18 per cent tax slab, lower than the current 28 per cent. 

“While food items and capital goods could be cheaper, there are many items in the 28 per cent bracket. These will be costlier,” said Bipin Sapra, partner, EY.

Pratik Jain of PwC-India said the categorisation of rates at the four-digit level will be a simplification in the tax structure over the current system. 

“It would help reduce litigation,” he added. With only six weeks to go for planned roll-out of the GST, clarity on rates was crucial.

What’s on cards for Friday

• Rates to be decided for packaged and branded food — to have higher taxes
• Gold, footwear, textiles, agriculture implements, and cigarette and bidi, will also be considered
• All services