After a full day of brainstorming on rate fitment, the all-powerful GST Council concluded day one of the two-day meet in Srinagar with some basic rules in place. The agenda for this meeting is to allocate various goods and services across five slab rates, viz. 0%, 5%, 12%, 18% and 28% and provide the final tax rates for GST implementation.
After today's meeting, the Revenue Secretary, Mr. Hasmukh Adhia said that,"Nearly 81 percent of the items will fall under below-18 percent GST rate slabs and only 19 per cent of the goods will be taxed above 18 percent."
This is also in keeping with what most of the industry watchdogs have already conveyed. It was a foregone conclusion that most of the goods and services will fall under the tax bracket of 18% so as not to throw the economy a curveball.
Key Takeaways from Day 1
- Sugar, Tea, Coffee and edible oil will fall under the 5 per cent slab, while cereals, milk will be part of the exempt list under GST. This is to ensure that basic goods are available at affordable prices. However, instant food has been kept outside this bracket so, no relief for Maggie lovers!
- The Council has set the rate for capital goods and industrial intermediate items at 18 per cent. This will positively impact domestic manufacturers as seamless input credit will be available for all capital goods. Indeed, it is time for "Make In India".
- Coal to be taxed at 5 percent against current 11.69 per cent. This will prove beneficial for the power sector and heavy industries which rely on coal supply. This will also help curb inflation. Expect a good run for Coal India tomorrow.
- Toothpaste, hair oil, and soaps will all be taxed at 18 percent, where currently they are taxed at 28 percent. Most of the cosmetics and fast moving consumer goods (FMCG) brands should get the benefit of this tax reduction. After all, Fair and Lovely might seem fairer in its pricing from now on!
- The 'mithai' from the neighbouring sweet shop might lose some of its flavour as Indian sweets will now be taxable at 5 per cent. If you have a sweet tooth, this could hurt your pocket a wee bit in the coming days.
The Council is expected to discuss the rate slabs for important goods like gold when the meeting resumes tomorrow. Services Tax rates have not been discussed today and are expected to be announced soon.