No state opposed 5% GST on food items at Council meet: Officials

With the 5% Goods and Services Tax on pre-packaged and labelled food products sold in containers up to 25 kg become effective from July 18, several opposition parties criticised the government for the move for what they termed an “anti-people” move, although representatives of states ruled by many of these opposition parties approved the tax on June 29 at the meeting of the GST Council.

The tax is part of an ongoing effort to rationalise tax rates, and stabilise the GST regime. With the end of the guaranteed compensation period to make good any shortfall in taxes, states no longer have an incentive to push for lower rates (a move usually driven by political considerations), experts said at the time.

The Council, at its 47th meeting held in Chandigarh on June 29, levied a 5% GST on “pre-packaged and labelled” local unbranded products such as rice, curd, papad and honey .

The GST Council is the apex decision-making body for the indirect tax regime. It is chaired by the Union finance minister and states’ finance ministers are its members. Barring one instance since its inception in July 2017, all decisions of the council have been unanimous. “At the 47th GST Council, no state opposed the move to bring the pre-packaged commodities under GST,” a senior official present in the meeting said requesting anonymity.

A second official aware of the development said that the rate rationalisations took place based on recommendations of a group of ministers (GoM). The Council, in its 45th meeting on September 17, 2021 in Lucknow decided that there was a need for the creation of a GoM to recommend several rate-related issues including, rate rationalisation, correction of duty inversions, ease classification-related complexities and enhance revenue generation, this person said, requesting not to be named.

Commenting on the new GST rates coming into force on Monday, Congress leader Rahul Gandhi said in a tweet: “High taxes, No jobs. BJP’s masterclass on how to destroy what was once one of the world’s fastest growing economies.”

The GoM that recommended changes in GST rates included members from seven states — Karnataka, Bihar, Goa, Kerala, Rajasthan, Uttar Pradesh, and West Bengal. While Rajasthan is ruled by the Congress, Kerala is ruled by the Left Democratic Front, and West Bengal by the Trinamool Congress, the second person said.

Besides a 5% GST on pre-packaged and labelled food items, the Council on June 29 raised taxes on items such as various types of inks, pencil sharpeners, knives, spoons, LED lamps, solar water heaters, power-driven pumps, and hospital rooms with a tariff above ₹5,000 per day. The monsoon session of the Parliament started on July 18 and functioning of both the houses was disrupted due to protests by the Opposition against GST hikes.

In a tweet, leader of Opposition in Rajya Sabha Mallikarjun Kharge said: “The hike in GST of rice, wheat, curd, barley, paneer, hospital rooms and other essential items is an issue of public concern which we tried to raise for debate. As usual the opposition wasn’t allowed to speak which is curbing the voice of people.”