Shampoo, Chocolate, Eating Out Cheaper After Big GST Cut

Union Finance Minister Arun Jaitley on Friday announced a big overhaul of new national tax GST, saying only 50 items will remain in the highest tax slab of 28 per cent, with 178 others moved to the 18 per cent bracket effective November 15. Dining out will also become cheaper, with food at all restaurants in the country, except those in starred hotels, to be taxed at 5 per cent rather than 18 per cent. Mr Jaitley announced the changes after a day-long meeting with state finance ministers in the powerful GST council that he heads. Prime Minister Narendra Modi called the decisions “people-friendly and people-centric”.
  1. The GST council has also reviewed the returns filing cycle and eased rules and deadlines for the current fiscal year. Penalties for late filing have been relaxed. The changes come amid complaints by traders and small businessmen who say GST has increased their tax and administrative burden.
  2. The Finance Minister said in more tax rate changes, 13 items will move from the 18 per cent slab to 12 per cent, six items from 18 per cent to 5 per cent, eight items from 12 to 5 and six from  5 per cent to nil. Under GST, goods and services are taxed in four brackets — 5, 12, 18 and 28 per cent.
  3. “The (GST) council has been reviewing and rationalising tax rates from time to time, especially those in the tax bracket of 28 per cent. Today, the council has decided to move 178 items from the tax bracket of 28 per cent to 18 per cent,” Arun Jaitley said.
  4. Among goods that will no longer be taxed 28 per cent GST are daily use items like shampoo, deodorant, toothpaste, shaving-cream, aftershave lotion, shoe polish, chocolate, chewing gum and nutritious drinks.
  5. On eating out, the finance minister said that while all restaurants in and outside hotels will carry a 5 per cent GST charge, at those in starred hotels with room tariffs above 7,500 a night customers will have to pay 18 per cent GST. The benefit of ITC (Input Tax Credit) to restaurants has been revoked to restaurants because they were not passing on the benefit to customers, the minister said.
  6. Sushil Modi, who heads a panel on the Goods and Services Tax Network in the council, said today’s changes will cost the exchequer around Rs. 20,000 crore ($3.07 billion) this financial year.
  7. West Bengal Finance Minister Amit Mitra said opposition parties had “fought and brought down the tax rates on different items but they (the government) did not agree totally and a few essential items are still in the higher slab of 28 per cent.”
  8. The new GST changes come amid allegations that the government’s GST roll-out and last year’s notes ban have caused economic disruption. India’s economy is expected to grow at its slowest pace in four years in the fiscal year that ends on March 31, a Reuters poll has found.
  9. “We will not allow BJP to impose a Gabbar Singh Tax on India. They cannot break the back of the small and medium businesses, crush the informal sector and destroy millions of jobs,” tweeted Congress vice president Rahul Gandhi as the GST council met.
  10. The Congress has alleged that the BJP government has timed the GST review with an eye on next month’s crucial assembly elections in Gujarat, where the important voter group of small traders is upset with the new tax regime.

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