Splitting hairs on GST

The Goods and Services Tax (GST) Council has to set tax rates for everything we buy and sell in India, and every item that comes before it is debated exhaustively by its members.

The minutes of its 16th meeting on June 11 — in which Union Finance Minister Arun Jaitley conferred with State Finance Ministers — show that there were some issues to be dealt with when it came to taxing the trade in human hair. During the 14th Council meeting in Srinagar in May, it had been decided it would fall in the 28% tax bracket.

According to the minutes of last Sunday’s meeting, “The Minister from Jharkhand stated that poor persons did not use wigs and there was no justification to keep the rate of tax on human hair as Nil and that this product should be taxed.”

Some members agreed with this stance, others protested.

A Joint Secretary from the Central Board of Excise and Customs said that human hair was an intermediate product; it is chemically treated, combed, and goes through other procedures before being made into wigs. which were to be taxed at 28%. West Bengal’s Finance Minister said people, who collected hair and cleaned and bleached it before sending it to Gujarat for making wigs, a high-end product, were actually very poor.

Eventually, the Council agreed to take a haircut. The rate of tax for human hair, ‘dressed, thinned, bleached or otherwise worked’ is nil. Human hair, unworked, whether washed and scoured or not, and waste of human hair is also exempt.

Kite fights

The GST Council has had a number of other interesting debates. One sensitive discussion was on kites.

Jharkhand’s Finance Minister said that there was no justification to tax kites at just 5%, as they were not a mass consumption item, only being flown during specific festivals.

He suggested a higher rate. The Council agreed with Gujarat, which said that all sections of society in that state, including the poor, flew kites during the festival season and that they were also manufactured by poor artisans and so the rate should remain at 5%.

At a previous meeting, the tax rate on animal semen was discussed.

Those minutes, though, are not publicly available.

Corrections and clarifications: GST was wrongly expanded as General Sales Tax. It has been corrected

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Printable version | Mar 8, 2021 9:05:14 PM |

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