GST rates fixed; 28% tax on lux­ury goods

BIG TAX RE­FORM Mass-use items to be taxed at 5%, zero tax on food grains

Hindustan Times ST (Mumbai) - HT Navi Mumbai Live - - FRONT PAGE - Mahua Venkatesh and Suchetana Ray let­ters@hin­dus­tan­

The all-pow­er­ful GST Coun­cil on Thurs­day agreed to give a lit­tle more re­lief to the poor and a lit­tle more grief to the rich in the goods and ser­vices tax (GST) slated to take ef­fect on April 1 next year.

The coun­cil did not give in to the de­mands that the num­ber of rates be re­duced, since the ideal GST has just one rate. The num­ber of rates re­mains four, though the low­est comes down from the ear­lier pro­posal of 6% to 5%, and the high­est goes up from 26% to 28%. The two stan­dard rates — which will ap­ply to the bulk of the items — are 12% and 18%.

There will be no tax on es­sen­tial items such as food – this is likely to beat down in­fla­tion, which has af­flicted food items in par­tic­u­lar. The low­est rate of 5% is on items of com­mon use and the high­est for lux­ury goods that now at­tract a to­tal tax — value-added tax and ex­cise — of 30 to 31%.

“I hope the in­di­rect tax outgo for the com­mon man will be marginally lower un­der the GST,” fi­nance min­is­ter Arun Jait­ley said in a me­dia brief­ing after the first day of the GST Coun­cil’s sixth meet­ing in New Delhi.

“The zero-tax rate will ap­ply to half of the items in the CPI (con­sumer price in­dex) bas­ket, in­clud­ing food grain used by the com­mon man.” The coun­cil will meet again on Fri­day.

The outgo will be more for those who buy lux­ury cars, aer­ated drinks, and cig­a­rettes and other to­bacco prod­ucts. Dubbed “de­merit goods”, th­ese will be taxed at 28% and at­tract a cess that may take the to­tal to 40% or more, though there is no con­fir­ma­tion yet of how much the cess will be.

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