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GST Council cuts rates on hotels, hikes on caffeinated beverages

Small taxpayer given relief from filing annual tax returns

Dilasha Seth  |  Panaji 

GST
Union Finance Minister Nirmala Sitharaman, who chaired the meeting, said the GST on caffeinated beverages was raised to 28 per cent plus a cess of 12 per cent against the current rate of 18 per cent

The (GST) Council on Friday more than doubled the rate for caffeinated beverages such as Thums Up Charged and Red Bull from 18 per cent to 40 per cent while giving relief for hotels and outdoor catering services.

Despite the strong demand from industry to cut the rates for automobiles, the only reduction announced was for 11- to 13-seater mini bus and the cess component at that.

Besides, simplified returns, which are to kick in next month in a phased manner, were postponed to April 1 next year. Those with an annual turnover of up to Rs 2 crore were given the option to file annual returns for 2017-18 and 2018-19.

On the other hand, those under the composition scheme (who file concessional flat rates and do not get input tax credit) were exempted from filing these returns.

Union Finance Minister Nirmala Sitharaman, who chaired the meeting, said the on caffeinated beverages was raised to 28 per cent plus a cess of 12 per cent against the current rate of 18 per cent.

Abhshek Jain, tax partner at EY, said: “This is aligned to the government's agenda of deterring the consumption of deleterious drinks. This now brings rates on such drinks on a par with aerated drinks.”

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For hotels, she announced a status quo of nil tax for those with tariffs of up to Rs 1,000 per night per room.

The on hotels charging Rs 1,001 to Rs 7,500 per room per night was cut to 12 per cent from 18 per cent. The tax on room tariffs of above Rs 7,500 a night was slashed to 18 per cent from 28 per cent.

“For a considerable time, different states have been expressing concern about the high GST rate on rooms and had demanded a reduction,” said Harpreet Singh, partner, KPMG.

Besides, the tax for outdoor catering by those with a daily tariff of at least Rs 7,501 for accommodation was reduced to 5 per cent without input tax credit (ITC) from the existing 18 per cent with ITC, she said. However, the GST on catering on premises with similar tariffs will remain the same at 18 per cent with ITC.

Revenue Secretary A B Pandey said the simplified returns would be introduced next year.

These were to be introduced next month in phases with all the forms to come into effect from January 1 next year.

The deadline for annual returns has been extended many a time from the original one of December 31, 2018.


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Krishan Arora, partner at Grant Thornton India, said while small players, especially the trading community and the unorganised sector, would be happy with relaxation in filing annual returns for two years, the government needed to also ensure steps to control revenue leakages and ensure adequate compliance levels.

Meanwhile, GST rates for many items were altered.

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The cess was cut on mini buses carrying more than 10 persons but up to 13 persons from 15 per cent to 1 per cent for petrol-driven and 3 per cent for diesel-driven vehicles.

Exemption from tax was given to imports of specified defence goods not manufactured in India.

Sitharaman said the rate for supply of job work services in relation to diamonds was reduced from 5 per cent to 1.5 per cent. Similarly, the rate was cut to 12 per cent from 18 per cent in these services in relation to the engineering industry, except bus body building, for which the rate would remain 18 per cent.

The council also exempted from the GST the services rendered for warehousing various food items such as cereals, pulses, fruit, nuts, and vegetables.

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The council also took steps to promote export. It exempted services provided by an intermediary to a supplier or recipient of goods when both supplier and recipient are located outside the taxable jurisdiction.

Besides, it exempted from the GST and the integrated GST the import of silver and platinum by specified agencies. Similarly, the supply of these items by these agencies for exports of jewellery was exempted from tax.

Among various other products, the GST was cut on marine fuel to 5 per cent, while on railway wagons, coaches, and rolling stock it was increased from 5 per cent to 12 per cent.

First Published: Sat, September 21 2019. 03:11 IST
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