GST Council Announces GST Rates
The GST Council headed by finance Minister Arun Jaitley has finalised tax rates and has approved all the seven rules for the GST regime that is scheduled to be implemented from July 1. The remaining two rules of the GST pertaining to transition and return is under the examination of the legal committee. In total, the council has fixed the rates of 1211 items. It will decide rates of some other items and services in the coming days.
- Out of 1211 items, 81% of the items will attract tax of 18% or less. Only the remaining 19% of items will attract a highest rate of 28%
- Household items like Sugar, Tea, Coffee and edible oil will attract 5% levy. Cereals and milk will be exempted from the tax.
- Manufactured goods will attract 18% levy.
- Luxury cars will attract 28% GST in addition to a cess of 15%. Small petrol cars will attract 28% GST plus a 1% cess, and diesel cars will be taxed at 28% plus 3% cess.
- Capital goods, a key asset for the manufacturing sector, will be taxed at 28%.
- Aerated drinks will fall under the 28% tax bracket.
The GST Council has not increased the overall tax in any of the 1211 items but have reduced tax on many items. For example, Soap, which is now taxed at the rate of 22-24%, will be taxed at 18%.
The present tax incidence in excess of 28% on luxury items will be treated as cess and will be deposited in the corpus for compensating states if they suffer any revenue loss.
Food items are expected to become cheaper. Daily use items like hair oil, toothpaste, and soap are kept in the 18% tax slab instead of 28%.
The cost of energy generation is expected to become less as tax incidence on coal has been reduced from 11% to 5%.
GST regime is expected to unify the whole of the country into a common market eliminating both Central and State levies. Also, GST is expected to increase state and federal tax revenues, ease inflation and boost economic growth by 1-2% points in the medium term.
Categories: Business & Economy Current Affairs 2017