GST redefines luxury: From chocolates to chewing gums, ACs to air travel, all come under highest tax slab of 28%

In case you were under impression that only staying in a five star hotel and owning a big car come under luxury, think again.

The Goods and Services Tax Bill redefined the term for the country putting items like chocolates, chewing gum, paints, leather jackets and even stationary items such as water colours in the highest slab, of 28 per cent.

But the addition to the list is quite surprising, with the inclusion of regular items such as butter, mustard flour, instant coffee, hair dyes and shampoos.

The services will be taxed in four different slabs with standard rate of 18 per cent and luxury rate of 28 per cent. The tax rates for services will be 5, 12, 18 and 28 per cent.

Following is the list of relevant items that will be impacted by the new tax slab:

Foodgrains, cereals and milk:

• From July 1, foodgrains, cereals and milk would cost less as the GST Council decided to exempt these daily-use commodities from the levy. 
  

• Daily-use commodities like sugar, tea, coffee (barring instant coffee) and edible put under the lowest tax basket of 5 per cent, almost the same as under the current tax structure.

• Milk and curd will continue to be exempted from taxation when the Goods and Service Tax (GST) replaced current indirect taxes but sweets will attract 5 per cent levy.

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• Foodgrains, especially wheat and rice, will come down as they will also be exempted, At present, some states levy Value Added Tax (VAT) on them.

Small and luxury cars:

• Small Cars would be in 28 per cent bracket, with an additional cess of 1-3 per cent levied on petrol and diesel cars of less than four metres. Luxury cars, however, would fall under 15 per cent.

• Experts believe that due to the fixed slab of 28 per cent there could be a decline in prices of large luxury cars and SUVs. 
  

• Motorcycles of more than 350 cc engine capacity will attract a total of 31 per cent tax under the GST regime, same as the tax incidence on private aircraft and luxury yachts.

Electronics:

• ACs, refrigerators and washing machines would fall in the 28 per cent slab.

Air Travel:

• Economy class air travel will attract 5 per cent GST while business class will be charged 12 cent.

 
Entertainment:

• Under the GST, entertainment tax will be merged with service tax and a composite 28 per cent tax rate will apply on cinema services as well as gambling or betting at race course.

Luxury items:

• 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. The GST Council agreed to impose cess on luxury goods over and above the peak tax rate of 28 per cent.

• The highest slab of 28 per cent under GST has also been applied on chewing gums, white chocolate, chocolates containing cocoa, wafers coated with chocolate, instant coffee, custard powder, students' colours, paints, varnishes, perfumes, beauty products, sunscreen, shampoos, hair dyes, after-shave lotions and deodorants.

• Additionally, fireworks, wash basins, articles of artificial fur, artificial flowers, wigs, razor blades, cutlery, air conditioners, refrigerators, storage water heaters, dish washers, photocopy machines, fax machines, insulated copper wires, cars, wrist watches, revolvers, pistols, cigarette lighters and smoking pipes, among others, will attract the highest slab.

Meanwhile, according to an Assocham report, GST will feature on the top of the governments list of achievements in the last three years that also saw some other credible measures on taxation and financial inclusion fronts.

As the Narendra Modi-led NDA government completes three years in office, the chamber drew a charter of measures on the economic front undertaken by the Centre.

"The implementation of Goods and Services Tax (GST) in the next few weeks would cap other major initiatives of the government. The focus on improving ease of doing business through measures like GST and other taxation reforms has also been noted as one of the major achievements of the NDA government," Assocham President Sandeep Jajodia said.

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