Tax on tea at 5%, chewing tobacco 160%

RATES FOR MORE THAN 500 SERVICES AND 1,200 GOODS WERE DECIDED ACROSS THE NATION

Rates for more than 500 services and 1,200 goods fixed and 80% to 90% of items slotted into GST’s five broad rates |

Tea will be taxed at 5 per cent and chewing tobacco will face a 160 per cent levy after India finalised most rates for a new goods and services tax, clearing the way for the biggest shake-up in the nation’s tax system since independence in 1947.

Rates for more than 500 services and 1,200 goods were fixed, or 80 per cent to 90 per cent of items were slotted into the GST’s five broad rates in meetings on Thursday and yesterday between the government and state ministers as the country races to meet the July 1 implementation deadline.

“It’s the last lap now of the GST roll out,” Manjoy Bahety, a vice-president at Mumbaibased Edelweiss Securities Ltd. said in a note. “The council’s decisions suggest a July 1 rollout is almost a certainty now.”

The tax is the culmination of a 10-year effort to streamline India’s archaic tax system and unify the nation of 1.3 billion people into a common market. A major policy goal for Prime Minister Narendra Modi, the GST will subsume more than a dozen federal and provincial levies in a bid to free up trade, make it easier to business and foster tax compliance in the world’s fastest-growing major economy.

The “overall impact is not inflationary,” Finance Minister Arun Jaitley told reporters late 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, 5 per cent for mass consumption items like coffee and commonly used products such as processed foods at 12 per cent.

India’s S&P BSE Sensex equity index touched a record high before closing up 0.1 per cent yesterday, spurred by consumer companies and utilities which will benefit from the GST rates.

The federal government has already agreed on compensation to states if revenue is lost due to the implementation of the GST.

PTI Union Finance Minister Arun Jaitley arrives to address a press conference on the concluding day of 14th Goods and Services Tax Council meet in Srinagar yesterday.