In the biggest overhaul of GST slabs yet, tax rates of over 200 items, ranging from chewing gum to beauty products, from wigs to wrist watches, were on Friday cut to provide relief to consumers and businesses amid economic slowdown.
Finance minister Arun Jaitley said after a meeting of the GST Council that tax rates of 178 items have been slashed while keeping only 50 items, mostly demerit, sin and luxury goods, in the top 28 per cent tax bracket. The new rates will come into effect from November 15.
“We could not take up the agenda of (bringing real estate under GST) in the meeting,” said Mr Jaitley soon after the 23rd GST Council meeting.
The council also brought down the GST on AC, non-AC restaurants to 5 per cent. Currently, 12 per cent GST on food bill is levied in non-AC restaurants and 18 per cent in AC ones.
The massive relief for consumers and businessmen comes before the Gujarat Assembly polls next month. During the BJP campaign in the state, Prime Minister Narendra Modi had hinted at a GST revamp to address concerns.
The announcements on Friday are the biggest concessions after the new indirect tax system took effect on July 1.
The 178 items whose tax slab has been brought down from 28% to 18% include 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. Also, tax on wet grinders and armoured vehicles was cut from 28% to 12%.
Mr Jaitley said tax rate on six items was reduced from 18% to 5%, on 8 items from 12 % to 5% and on six items from 5% to nil. Pasta, handbags made of cotton and Jute will be among the 13 items that will now attract a 12% tax instead of 18%.
“In the last few meetings, as a part of our effort to rationalise GST structure, council has been reviewing rates from time to time. When the rates were originally fixed by saddling previous taxes, the principal of equivalence had been applied. Therefore each item of good was specifically fit into VAT category,” Mr Jaitley said.
“There was unanimity that in the 28% category there should be only sin and demerit goods. So, today the GST Council took a historic decision, that in the 28% slab there will be only 50 items and the remaining items have been brought down to 18 per cent,” he said.
There were 228 items in the 28% slab before the meeting. The fitment committee had recommended that the top 28% slab should be pruned to 62 items. But the GST Council has further pruned 12 more items, he said.
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 machine, washing machine, refrigerators, vacuum cleaners, cars and two-wheelers, aircraft and yacht.
The Congress reacted angrily to the developments. “We will not allow BJP to impose a Gabbar Singh Tax on India. They cannot break the back of the small and medium businesses, crush the informal sector and destroy millions of jobs. #GSTCouncilMeet” said Congress V-P Rahul Gandhi in a tweet.
Former finance minister P. Chidambaram said on Twitter that with economy growing by its slowest pace since Narendra Modi government came to power, the “panic-stricken govt has no option but to concede demands for change” in the tax, Bihar deputy chief minister Sushil Modi said that the decision taken by the GST Council will have cause a revenue loss of `20,000 crore annually. “There was consensus that slowly 28% slab should be brought to 18% cent. But it will take some time because it has a big revenue implication,” he said.
It is one of the biggest concessions announced after the new indirect tax system took effect on 1 July.