Guwahati: In a massive relief for consumers, the Goods and Services Tax (GST) Council lowered the tax rate of 178 items to 18 per cent from existing 28 per cent. The changes will be applicable from November 15, Union Finance Minister Arun Jaitley said on Friday.
All restaurants in the country will be levied a GST of 5 per cent against existing 12 per cent for non-AC and 18 per cent for AC restaurants, Jaitley said, while addressing media in Guwahati.
Besides, 13 items have been moved to 12 per cent from 18 per cent, six items to 5 per cent from 18 per cent, eight items to 5 per cent from 12 per cent and six items to nil from 5 per cent.
Only 50 items, mostly demerit, sin and luxury goods were kept in top 28 per cent tax bracket.
Jaitley said the restaurants, except in starred hotels, would be deprived of the Input Tax Credit (ITC) benefits.
He clarified that the ITC benefits given to restaurants were meant to be passed on to the customers.
“However, we found that hotels were not doing so, we had to decide that restaurant industry will not enjoy the benefit of ITC,” said Jaitley, adding that some industries are passing the benefit of ITC to consumers.
"Outdoor catering will be at 18 percent with ITC," he said.
"In the last few meetings, as a part of our effort to rationalise GST structure, council has been reviewing rates from time to time. When the rates were originally fixed by saddling previous taxes, the principal of equivalence had been applied. Therefore each item of good was specifically fit into VAT category," Jaitley said.
"Having done the exercise, in the last 3 meetings, we have been systematically looking at the 28 per cent tax bracket and rationalising items from it to the lesser category,” he added.
The finance minister said that bringing real estate under GST was also on the agenda of the council but it was left over for next meeting. “We could not take up the agenda of real estate in the meeting,” said Jaitley soon after 23rd GST council meeting.
“There were 228 items in the 28 per cent slab. The fitment committee had recommended that it should be pruned to 62 items. But the GST Council has further pruned 12 more items."
"Lower 18 per cent GST will be levied on chewing gums, chocolates, after shave, deodorant, washing power, detergent, marble," he added.
He said all types of chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoo, deodorants, washing powder detergent and granite and marble will attract lower 18 per cent tax rate.
“There was unanimity that in 28 per cent category there should be only sin and demerit goods. So, today the GST Council took a historic decision, that in the 28 per cent slab there will be only 50 items and the remaining items have been brought down to 18 per cent,” Jaitley said.
Paints and cement have been retained in the 28 per cent tax bracket. "Luxury goods like washing machines and air conditioners have been retained at 28 per cent," he added.
Earlier, Bihar Deputy Chief Minister Sushil Modi said that the decision taken by the GST Council will have a revenue implication of Rs 20,000 crore annually.
"There was consensus that slowly 28 per cent slab should be brought to 18 per cent. But it will take some time because it has a big revenue implication," he said.