132 days after rollout, GST cut on over 210 items – 180 of them in top 28% slab
States Peg Total Loss At 20,000Cr, Centre Says It’s Mostly Notional
Guwahati: Making the biggest change in the fourmonth-old goods and services tax regime, the GST Council on Friday moved 80% of items in the top 28% tax bracket to lower rates. Starting November 15, eating out could cost 5-6% less than before and a whole host of consumer products, like shampoo, deodorant, chocolates, fans, furniture and sanitary fittings, should get cheaper by up to 10% or more. acket. That’s a reduction of 80% in the number of items in just 132 days.
The total tax on several products still in the highest slab will be higher than 28% since they also attract a cess.
The government also reduced the levy under composition scheme for traders and industry to 1% of turnover, with further easing for those selling exempted goods.
Finance minister Arun Jaitley said the rate adjustment was part of the rationalisation exercise undertaken over the last few months. “Optically, some of them should not have been there (in 28% slab). There are some items in which small players were exempted from excise (duty payment before GST was rolled out),” he told reporters after a seven-hour meeting of the panel that has representation from all states and two Union Territories. A lower tax rate is expected to translate into a reduction in prices of over 200 products.
The council went beyond the recommendations of the fitment committee comprising officers. The committee had suggested keeping 62 items in the highest bracket. The ministers, however, ignored demands for duty reduction from the construction sector and left cement and paints in the 28% slab. Panic-stricken govt has no option but to concede demands for change. Thanks to Gujarat elections, government forced to heed advice of opposition and experts on flaws in implementation of GST
The latest round of changes will leave a Rs 20,000-crore hole in the pockets of the states and the Centre. It is the Union government that will have to bear the burden of any shortfall in collections since it has committed to make good any revenue loss for five years. Jaitley, however, said the revenue loss was notional.
“Rate reduction for 200plus goods and services may suggest that there is buoyancy in tax collections,” said Divyesh Lapsiwala, tax partner at consulting firm EY India,
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suggesting that the revenue loss will be compensated.
More than the revenue considerations, the move is aimed at cheering consumers and placating traders and small businesses who have been complaining of higher compliance burden. With consumers on its side, the Centre is hoping that the protests from traders will wane. The rate cuts should reduce leakages as there is lower incentive to evade taxes.
Assam finance minister Himanta Biswa Sarma, who headed the group of ministers for reviewing the tax structure for restaurants, said on Friday, “Today we have addressed every small issue raised by industry, traders and consumers.”
In May, when rates were finalised by the GST Council, the Centre and the states had agreed to rework rates to ensure that they would be close to the combined incidence of Union excise duty and state value added tax. That principle has been given a go-by, at least in the highest bracket.
New rates come into effect from