GST slashed on mass use products

Finance minister Arun Jaitley on Friday said that the GST council has decided to slash tax on 178 items while keeping only 50 items, mostly demerit, sin and luxury goods in the top 28 per cent tax bracket.

Informing that all restaurants in the country would be levied GST of 5 per cent, Mr Jaitley told reporters that, however, they would be deprived of the Input Tax Credit (ITC) benefits.

He clarified that the ITC benefits given to restaurants were meant to be passed on to the customers.

“However, we found that hotels were not doing so, therefore we had to decide that restaurant industry will not enjoy the benefits of ITC,” said Mr Jaitley adding that some industries are passing on the ITC benefit to the consumers.

He stressed that no ITC benefit will be given to restaurants, except in starred hotels. “Outdoor catering will be at 18 percent with ITC,” he said.

“In the last few meetings, as part of our effort to rationalise GST structure, the 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.

He said, “Having done the exercise, in the last 3 meetings, we have been systematically looking at the 28 per cent tax bracket and ratronalising items from it to the lesser category.” Mr Jaitley announced that the changes would be applicable from November 15.

The Congress, which made GST a major election issue, quickly claimed credit for the Council's decision to cut tax rates. “The government was forced to do so due to the pressure mounted by party vicepresident Rahul Gandhi and the huge response his campaign had been receiving in poll-bound Gujarat,” said Congress general secretary incharge of Gujarat Ashok Gehlot. Mr Gandhi also reiterated that India needed a simple tax and not the “Gabbar Singh Tax” as he had been describing the tax regime to target the Modi government. Congress leader and former finance minister P. Chidambaram, meanwhile, tweeted “Thank You Gujarat” and said “Your (Gujarat) elections did what Parliament and common sense could not do.”