The Goods and Services Tax (GST) Council on Sunday decided to reduce tax rates on 66 items including cashew nuts, packaged foods such as sauces and pickles, agarbatti, insulin, school bags, children’s colouring books, cutlery, and some tractor components. The Council has also reduced the tax rate on cinema tickets costing Rs. 100 or less.
Finance Minister Arun Jaitley, while addressing the media following the conclusion of the one-day meeting in the capital, said that the tax rate on cashew nuts has been reduced to 5% from 12%, while the rate on sauces, pickles, mustard sauce, and other similar packaged foods has been reduced to 12% from the 18% earlier set.
The rate on agarbatti has been reduced to 5% from 12%, and the same has been done for insulin. There will be no GST on children’s colouring books, while that on school bags has been reduced to 18% from 28%. The rate on components that can only be used in tractors has been reduced to 18% from 28%. The Council will meet again on June 18 to discuss any pending issues, including the e-waybill rules and the rates on lotteries, Mr. Jaitley said.
The Council also decided to increase the limit under the compensation scheme from Rs. 50 lakh to Rs. 75 lakh. The scheme was introduced for small businesses that would struggle to comply with the various requirements of GST.
Those opting for the scheme will have to pay tax at the rate of 1% for the trading community, 2% for those engaged in manufacturing, and 5% for restaurants, Mr. Jaitley said.
“There are two objectives behind this move,” he said. “The first is to maintain revenue neutrality, and this also eases the burden on SMEs and small businesses in trading, manufacturing, and the restaurant business because they are mass job creators.”
“This should mean that a significant number of SME sector players should benefit from not having to meet with detailed compliances under GST and also having a less financial burden, on account of GST,” Mahesh Jaising, Partner, Indirect Tax, BMR & Associates said.
Complete list soon
“We have received 133 representations asking us to reconsider rates, and we have revised downwards the rates on 66 items,” the Finance Minister said, adding that the complete list would be released soon. “It has also been decided that for cinema tickets costing Rs. 100 or less, the tax rate will be reduced to 18%, and for tickets costing above Rs. 100, it will remain at 28%,” Mr. Jaitley said. The Council, however, has decided to retain the 12% tax rate on sanitary pads.
“The reduction of GST rates indicates that many consumer items may see a price reduction or at least equivalence of prices after GST is introduced,” M.S. Mani, Senior Director at Deloitte Haskins & Sells said.
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