GST rates for gold, garments, footwear out. Here’s how much you have to pay
The Centre finalised on Saturday goods and services tax (GST) rates for items such as gold, packaged food, biscuits, footwear and solar panels – besides some pending rules – paving the way for the country’s biggest tax reform from July 1.
The GST Council has tried to keep the tax rates low for most items because the Narendra Modi government wants to discourage inflation and nurture economic growth, which slipped to 7.1% in 2016-17 from 8% a year ago.
The council will meet again on June 11 to complete all the processes required for a smooth rollout. The new regime will have four slabs of 5%, 12%, 18% and 28%, with the intention of unifying the nation into a single market.
Union finance minister Arun Jaitley said the GST rates for packaged food has been fixed at 5%, while biscuits will be taxed at 18%. Gold will be taxed at 3% as against the current tax incidence of 2-6%, varying from state to state, while it will be 0.25% for rough diamonds.
“Gold currently has an excise rate of 1% and states charge 1% VAT... keeping these taxes in mind, and after a lot of debate in the GST Council, we have reached a consensus on 3% for gold and gold jewellery,” Jaitley told reporters after a meeting of the GST Council.
Silk and jute will be exempt, but cotton and natural fibre will be taxed at 5%, man-made fibres at 18%, and apparel costing below Rs 1,000 will be taxed at 5%. Footwear below Rs 500 will be taxed at 5% while the rest would come in the 18% bracket.
Beedi and beedi leaf will not attract a cess over and above the tax of 28%, Jaitley said, adding that the tax on solar panels will be 5%.
Earlier, the GST Council had decided to exempt most food items – including wheat, rice and milk – from the Goods and Services Tax (GST). Other household items, such as sugar, tea, coffee and edible oil, would attract 5% tax, senior officials said after the council meeting. The tax on coal has been fixed at 5%, as against the current 11.69%.
“There is no increase in taxes on the items considered today. In fact, taxes have come down for many of them,” Jaitley said.
The Union government is eager to see a seamless transition to the new tax regime, which aims to protect the revenues of the Centre and states without hurting the poor. It is hoped that GST will create a unified market, shore up state and federal tax revenues, cool inflation and accelerate economic growth by 1-2 percentage points in the medium term.
The GST Council decided the tax rates for 1,200 goods and 500 services with a majority of the manufactured items and services being kept at 12-18%. It also revised some of the rules on Saturday.
Ernst & Young tax partner Divyesh Lapsiwala said the formats of return have been changed significantly. “Taxpayers will have to review all the revised requirements in detail to make sure that no new data elements are required. This will mean that taxpayers will need a longer lead time to get ready for compliances,” he said.
The Council also decided to set up an anti-profiteering body to check companies from over-charging consumers. “Detailed rules in this regard will emerge later,” said Rajeev Dimri, leader of indirect tax at BMR & Associates.