Moving yet another step closer to reality, Goods and Services Tax (GST) will bring good news for crores of denizens in the country from July 1 as the GST Council finalised the tax rates for all, except six items, in a crucial meeting on the first day of the two-day meeting in Srinagar on Thursday. The panel has decided that essential foodgrains will be cheaper and most raw food items, including milk, will be exempted from tax, while rates for processed food items are yet to be finalised.
The GST Council, headed by Union Finance Minister Arun Jaitley and comprising State Finance Ministers, fixed the rates for 1,211 items, amid demand by some States to keep essential items under the lower tax category. Under the new tax, rates will range from 5 to 28 per cent, with 12 and 18 per cent being the standard rates.
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. Milk and curd will continue to be exempt from taxation when the GST replaces current indirect taxes. 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 rate. Prices of foodgrains, especially wheat and rice, will come down as they will be exempt from GST. Raising prospects of lower power tariffs in line with new coal linkage policy of the Government, the panel has also decided that coal will be taxed at 5 per cent under GST, compared to a current effective rate of 11.7 per cent.
“Fixing of the GST rate on coal at 5 per cent will lead to stabilisation of steel prices. The GST Council has decided to keep coal in the 5 per cent tax slab under the new sales tax regime against current tax incidence of 11.69 per cent,” said a top official in the meeting.
Currently, some States levy Value Added Tax (VAT) on them. “We have finalised tax rates for majority of items as well as the exempt list at the meeting,” Jaitley told the media at Sher-e-Kashmir International Convention Complex in Srinagar. He added that the tax rate for items that would be decided on Friday include gold, footwear, branded items and bidi. “Also, the GST for packaged food items is to be finalised. On Friday, we will also decide on the rate of tax for services,” he said.
Seven 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, while aerated drinks and cars will be in 28 per cent bracket. On top of the peak rate, small cars will attract a 1 per cent cess, mid-sized cars will attract 3 per cent and luxury cars 15 per cent.
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. ACs and refrigerators will fall in the 28 per cent tax slab while life-saving drugs have been kept at 5 per cent rate.
Jaitley, however, 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. He said the key feature of this 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,” he added.
“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.
Earlier, J&K Finance Minister Haseeb A Drabu said the State Government would introduce GST Bill in next 30 days in State legislature.
Revenue secretary Hasmukh Adhia said the consumer States like Jammu & Kashmir would be hugely benefited by the GST. Jaitley lauded the J&K government for exemplary arrangement for the GST council meeting.