After months of waiting, there is finally a clarity on what essential goods and services will cost under the new tax regime with the GST Council deciding what commodity will fall under which basket after a two-day meet in Srinagar.
There were no major surprises, with essential commodities such as food grains (rice, dal, wheat) exempted and essential daily-use commodities like sugar, tea, coffee (barring instant coffee) and edible put under the lowest tax basket of 5 per cent, almost the same as under the current tax structure.
For services, the GST Council finalised four tax rates that will apply to services including telecoms, insurance, hotels and restaurants. Finance Minister Arun Jaitley said that the services will be taxed in four different slabs with standard rate of 18 per cent and luxury rate of 28 per cent. The tax rates for services will be 5, 12, 18 and 28 per cent.
GST – NO TAX ITEMS
Daily items like milk, paneer and curd won’t be taxed under the GST. The GST Council decided not to tax metro travel, religious travel and Haj yatra under the new tax structure. There won’t be any tax on healthcare and education under the new taxation system. Basic food items like cereals, eggs and meat will attract no tax after the GST is effective.
GST- 5 per cent (Lowest tax items)
After the new tax structure, electricity generation will get cheaper as the GST council has brought down the current tax on coal to 5 per cent from the current tax rate of 11.69 per cent. Sweets will attract 5 per cent tax under the GST. Apart from this, the life-saving drugs have been kept at 5 per cent rate.
The Council kept transport services in the lowest tax bracket of 5 per cent. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6 per cent tax. Non-AC train travel will be exempt and the 5 per cent will be levied on AC travel tickets.
Here are some other key announcements:
Restaurants: Non-AC restaurants will charge 12 per cent GST on food bill. Tax rate for AC restaurants and those with liquor licence will be 18 per cent, while 5-star hotels will charge 28 per cent GST. Restaurants with Rs 50 lakh or below turnover will go under the 5 per cent composition.
Hotels and lodges: Under the new tax rules, hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Tax rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12 per cent while those with tariff of Rs 2,500 to Rs 5,000 would be 18 per cent. GST for hotels with tariff above Rs 5,000 will be 28 per cent.
Automobiles: Motorcycles of more than 350 cc engine capacity will attract a total of 31 per cent tax under the GST regime, same as the tax incidence on private aircraft and luxury yachts. All cars, buses, trucks and motorcycles including moped as well as personal aircraft and luxury yachts will attract a peak Goods and Services Tax of 28 per cent.
Air Travel: Economy class air travel will attract 5 per cent GST while business class will be charged 12 cent.
Entertainment: Under the GST, entertainment tax will be merged with service tax and a composite 28 per cent tax rate will apply on cinema services as well as gambling or betting at race course.
Tobacco products: Filter and non-filter cigarettes not exceeding 65 mm will attract cess of 5 per cent plus Rs 1,591 per 1000 sticks. For cigars, a hefty levy of 21 per cent or Rs 4,170 per 1000 sticks, whichever is higher, would be levied. Branded gutkha will be slapped with a cess of 72 per cent, while smoking mixtures for pipes and cigarettes will attract a levy 290 per cent.
Luxury items: On gold, states demanded a 4 per cent tax even though the rate is not among the 5, 12, 18 and 28 per cent approved bands. The GST Council agreed to impose cess on luxury goods over and above the peak tax rate of 28 per cent.