INDIA FIXES GST RATES
Culmination of 10 years of efforts to streamline archaic tax system
MUMBAI in the world’s fastest-growing major economy.
The “overall impact is not inflationary”, said Finance Minister Arun Jaitley late on Thursday after meetings in Srinagar, a city in the northern state of Jammu and Kashmir. “The tax burden hasn’t increased in any commodity. In many there is a reduction, particularly as tax on tax is gone. On some we have deliberately brought tax down.”
Much of the work on the GST had already been completed, including the five broad “slabs” or tax rates. These include a rate of zero for essential items such as grains, five per cent for mass consumption items like coffee and 12 per cent for commonly used products such as processed foods. Rates for household goods like soaps were penciled in at 18 per cent and durables such as LED TVs at 28 per cent.
The government announced a detailed list on Thursday, which included a tax rate of five per cent for tea, 12 per cent for live horses and 28 per cent for razor blades. Key categories where rates would be higher than the current rate were two-wheelers, small cars, cement, fruit juices and chocolates, according to Mumbaibased brokerage Kotak Institutional Equities.
Luxury items will face a levy beyond the 28 per cent top rate, including 160 per cent levy for chewing tobacco, 12 per cent for soft drinks and 72 per cent for hookah products. GST rates for certain goods like textile and precious metals are yet to be decided by the GST Council.
It said yesterday railway and air transport services would attract a five per cent rate, luxury hotels would take the highest rate, while healthcare and education would continue to be exempt.
Nearly 81 per cent of the items would fall below the 18 per cent rate, said Revenue Secretary Hasmukh Adhia.
India is joining about 160 countries that have a GST, including Poland, Canada and Japan.
The federal government has already agreed on compensation to states if revenue is lost due to the implementation of the GST.
As of May 4, eight states including Rajasthan, Telangana, Bihar, Madhya Pradesh, Haryana and Jharkhand had passed a state GST act in their state assemblies. The remaining states were likely to pass the state GST bill “before the end of this month”, except for one or two, according to a federal government statement. Bloomberg
Tea will be taxed at five per cent once India implements the Goods and Services Tax on July 1 as planned.