GST Council cuts 10 per cent tax on over 200 daily use goods, only 50 items left in top tax slab

Mail Today Bureau        Last Updated: November 11, 2017  | 10:54 IST
GST Council cuts 10 per cent tax on over 200 daily use goods, only 50 items left in top tax slab

In a major rejig of GST rates, Finance Minister Arun Jaitley on Friday announced a 10 per cent cut in tax on over 200 goods ranging from chocolates to cosmetics to artificial fur coats and wrist watches, a move that is expected to spur consumer demand and rev up industrial production in a slowing economy.

As many as 178 items of daily use were shifted from the highest tax bracket of 28 per cent to 18 per cent. In the services segment, the tax rate was reduced to 5 per cent for all restaurants, both air- conditioned and non-AC while food bills in restaurants of starred hotels will be taxed at a higher rate , Finance Minister Arun Jaitley said after the GST Council meeting in Guwahati.

The new tax slabs will come into effect from November 15. The all-powerful GST Council reduced the number of items in the top 28 per cent Goods and Services Tax (GST) slab to just 50 from 228 that were put on the list until now. Only luxury and sin goods such as cigarettes and sugary drinks remain in the highest tax bracket and items of daily use of the middle-class have been shifted to the 18 per cent slab.

Jaitley also said that the tax on wet grinders and armoured vehicles has been cut from 28 per cent to 12 per cent while the tax rate on six items has been 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 tax rate has been cut from 28 per cent to 18 per cent.

The 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 machines, washing machines, refrigerators, vacuum cleaners, cars and two-wheelers, aircrafts and yachts.

The cut in tax will cost Rs 20,000 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. The Modi government has been facing criticism for the economic disruption caused by the GST roll-out and last year's shock demonetization. As a result, India's economy is expected to grow at its slowest pace in four years.

The government is worried on the political front as well because of the assembly elections in key states including Gujarat. It has taken on board complaints of small and medium businesses and announced an easing of GST norms to make compliance easier. To ease the compliance burden, the Council relaxed the return filing criteria and also lowered the penalties for late filing.

REACTIONS

Panic-stricken govt has no option but to concede to demands for change. Thanks to Gujarat elections, government forced to heed advice of Opposition and experts on flaws in implementation of GST: P Chidambaram

The increase in the composition scheme threshold will make life much easier for the small business entities. The impact of these changes will be positively felt in the next few months: Assocham

If traders are taken into confidence and various procedures are eased, the trading community will ensure the compensation of losses that the government is likely to suffer because of this move by making all efforts to widen the tax net base: Traders body CAIT

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