Foodgrains and
common-use products like hair oil, soaps and toothpaste as also
electricity will cost less from July 1 when the GST is scheduled to be
rolled out as the all-powerful GST Council today finalised tax rates for
bulk of the items. While the Council fitted all but six items in 5,
12, 18 or 28 per cent tax brackets, cars will attract the top rate as
also a cess in the range of 1 to 15 per cent on top of it. Smalls cars
will be charged 1 per cent cess on top of 28 per cent tax, mid-sized
cars will attract 3 per cent cess and luxury cars 15 per cent cess on
top of the peak rate. Aerated drinks too have been put in the 28 per
cent bracket but the rates for bidis along with gold, footwear and
branded items would be decided tomorrow. The Goods and Services Tax
(GST) on coal has been brought down to 5 per cent from the current tax
incidence of 11.69 per cent, thereby making electricity generation
cheaper. The GST rates for all but six items were finalised at the
first day of the two-day meeting here of the GST Council, headed by
Union Finance Minister Arun Jaitley and comprising state
representatives. Common use products like hair oil, soaps and
toothpaste will be charged with a single national sales tax or GST of 18
per cent instead of present 22-24 per cent tax incidence through a
combination of central and state government levies. ACs and
refrigerators will fall in the 28 per cent tax slab while life-saving
drugs have been kept at 5 per cent rate. All capital goods and all
industrial intermediaries would attract 18 per cent tax instead of 28
per cent. Milk and curd will continue to be exempt from taxation when
the GST replaced current indirect taxes. 'Mithai' or sweets will attract
5 per cent levy. Daily-use items like sugar, tea, coffee (barring
instant coffee) and edible oil will attract the lowest tax rate of 5 per
cent, almost the same as current incidence. Prices of foodgrains,
especially wheat and rice, will come down as they will be exempt from
the GST. Currently, some states levy Value Added Tax (VAT) on them. "We
have finalised tax rates for a majority of items as well as the exempt
list (at today's meeting)," Jaitley told reporters here. Out of the
1,211 items, the GST rate for all but six was decided on the first day,
he said, adding the tax rate for items that would be decided tomorrow
include gold, footwear, branded items and bidi. "Rates have been
finalised for the rest," he said. Also, the GST for packaged food items
is to be finalised. Tomorrow's meeting will also decide on the rate of
tax for services, the finance minister said. "(With) the standard rate
items of 12.5 per cent and 15 per cent, plus the cascading effect of
local taxes, the tax rate was going up to 30-31 per cent. These 30-31
per cent taxes... have all been brought down to 28 per cent. "Of these,
some are items to be used by common man soap, oil -- that has been
brought down to 18 per cent. So there will be a substantial reduction as
far as those items are concerned. We have kept one criteria in mind
that the overall impact is not inflation, in fact it brings down the
costs," Jaitley added. Revenue Secretary Hasmukh Adhia said 7 per cent
of the items fall under the exempt list while 14 per cent have been put
in the lowest tax bracket of 5 per cent. Another 17 per cent items are
in 12 per cent tax bracket, 43 per cent in 18 per cent tax slab and only
19 per cent of goods fall in the top tax bracket of 28 per cent. As
many as 81 per cent of the items will attract 18 per cent or less GST.
On gold, states demanded a 4 per cent tax even though the rate is not
among the 5, 12, 18 and 28 per cent approved bands. Jaitley said there
will be no inflationary impact as most of the rates which are at 31 per
cent have been brought down to 28 per cent. Coal will attract the GST
of 5 per cent as against the current tax incidence of 11.69 per cent.
"Cereals will be in exempt list. But what is to be done with packaged
and branded food that has to be separately decided. We are yet to make a
decision on that," he said. Jaitley said the key feature of today's
rate decision has been that "tax rate under GST will not go up for any
of the commodities. There is no increase. On many commodities, there is a
reduction particularly because the cascading effect of tax is gone."
"Of several commodities, we have consciously brought down the tax. In
the overall basket there would be a reduction, but we are banking on the
hope that because of a more efficient system, evasion would be checked
and tax buoyancy would go up. That despite reduction the revenue
neutrality and tax buoyancy thereafter would be maintained," he added.
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