GST lowers taxes on household items, Luxury to be charged extra

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Kunwar Prithvi Singh Chauhan
Part time journalist, full-time observer. Editor-in-Chief at The Indian Wire. I cover updates related to business and startups.

Over the ongoing fiasco about GST, the council in SriNagar agreed on tax rate for majority of items. Under the new taxation scheme, the government has proposed making household items more affordable and has levied extra cess and surcharges on luxury items including high end cars and tobacco items.

Government has exempted daily essential items including milk, fruits, vegetables, jaggery, cereals and foodgrains. At the same time, other household items including tea, coffee, sugar, edible oil and sweets have been placed under the lowest GST slab and will attract a tax of 5%.

GST council was meeting as a part of their 2 days event, where a lot of key decisions regarding GST are expected to be taken. On the first day, the council was successful in making a mutual agreement over the taxation to be put on a majority of the items.

According to the agreed terms, small diesel and petrol cars will have 28% tax rate with additional 3% and 1% cess. The rates will marginally decline as the cars currently attract a tax of 31-33%. Luxury cars are under highly taxed items and users will have to pay 15% cess along with 28% tax on buying on high end luxury cars. Consumer durable items are also placed in 28% slab, earlier, these items used to have at least 32-32% tax on average.

Speaking to the reporters after day’s proceedings, Arun Jaitley, Union Finance Minister and head of GST council, clarified that GST will not increase tax on any of these items. There will fall in prices for a lot of items as GST scraps tax on tax. Also, a number of goods, which were taxed over 30% before, have been out in 18% and 28% slabs.

Out of over 1,211 items put for discussion, 7% items have been exempted under GST. Out of the rest, 14% will have a 5% tax rate, 17% will have 12% tax rate, 43% will face 18% tax rate and the remaining 19% will be put under the highest tax slab. Along with this, luxury items and tobacco products will face additional cess and surcharges.

The biggest issue which remains to be addressed on day two of GST council meeting is taxation of products with variable pricing. Clothing, Jewellery, Packaged food and footwear come in various price range. Some of the footwear manufacturers have demanded to include their lower priced products under the lowest tax slab or exempted. Same has been the case with food products like biscuits. Kerala has demanded to tax gold and other luxury items to a higher rate.

The GST council will have some major concerns to address on day two of the meeting. Though there are possibilities that the meeting will complete formalities for GST’s implementation on July 1.

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