The Goods and Services Tax (GST) Council on Saturday fixed a rate of three per cent on gold, silver and processed diamond under the new indirect tax regime, while deciding to tax biscuits of all varieties at a uniform 18 per cent.
But hoping to spare the common man from very high tax rates, it announced dual rates for footwear and textiles to ensure that the common people are not impacted.
While footwear priced up to Rs 500 will be taxed at five per cent, all other types would be taxed at 18 per cent.
Similarly, ready made apparel priced up to Rs 1,000 would be taxed at five per cent under GST, while costlier clothes would attract a tax of 12 per cent.
“Both in the case of footwear and textiles, a major concession has been given,” said Finance Minister Arun Jaitley after the meeting.
Meanwhile, fibre of silk and jute will not attract any tax under GST. Cotton and other natural fibres as well as all categories of yarn will attract a tax of five per cent. A higher GST rate of 18 per cent will be levied on both man made fibre and yarn.
In the case of precious metals, Jaitley said a tax of 0.25 per cent will be levied on rough diamonds to keep an audit trail.
While welcoming the move, tax experts said that other sectors could also seek a special rate. “The decision to create a new rate category for gold, silver and diamonds indicates that the government has maintained the parity with existing tax rates; however this may open the door for other products to request special rates for their products or their coverage in the 3 per cent slab,” said MS Mani - Senior Director, Deloitte.
The GST Council, which met for its 15th round of discussions, also decided to levy a tax of five per cent on packaged food items under a registered trade mark. Jaitley assured that food items sold loose will not be taxed.
Bidi wrappers or tendu leaves will be taxed at 18 per cent while bidis will be taxed at 28 per cent under GST.
The Council also fixed the definition of pooja saamagri, which will be exempt from GST. It also finalised the definition of handmade matches.
Agricultural machinery , which is currently taxed at 8.79 per cent will be taxed at five per cent under GST while those taxed at 13.79 per cent at present, will be taxed at 12 per cent.
Canteen stores department (CSD) of the armed forces currently enjoy an exemption from value added tax. Under GST, the Council has decided that it will sell goods at the normal price and the Centre and States will together refund 50 per cent of the tax amount.
Revenue Secretary Hasmukh Adhia also clarified that solar panels will be taxed at five per cent under GST.
The Council will meet once again on June 11 when it will finalise the tax rate of lottery as well as discuss any item that States may seek a review on. The draft rules for accounts and records and the e-way Bill will also be taken up then for finalisation.
Jaitley stressed that the Council is confident of being able to “stick” to the target date of July 1.
Anti-profiteering authority
To ensure that companies don’t increase prices of commodities in anticipation of GST, the Council has also decided the manner of implementation of the anti-profiteering authority. It will set up a committee of officers of the Union Finance Ministry and States to examine any complaints.
Transition Provisions
The GST Council also approved the rules for transitional provisions giving a major concession to costlier items such as consumer durables and automobiles.
According to the revised rules, goods taxed at 18 per cent or above will get a deemed input tax credit of 60 per cent but items taxed at lower rates would still get a deemed input tax credit of 40 per cent.
Revenue Secretary Hasmukh Adhia further said that for items priced at over Rs 25,000 and serially numbered, 100 per cnet credit availability will be available under GST. “The manufacturer can give a credit transfer document to the dealer,” he said, adding that it will be a big relief to them.
GST rates:
Biscuits:
Under GST: Proposed to be taxed at 18 per cent
Current status: Embedded tax of 20.6 per cent on biscuits costing Rs 100/ kg, though no direct excise duty. Other Biscuits are taxed at 23.11 per cent.
Footwear:
Under GST: Costing up to Rs 500 will be taxed at 5%, while others will be taxed at 18 per cent.
Current status: Footwear less than Rs 500 has a tax of 9.5%, those between Rs 500 and Rs 1,000 or made of leather are taxed at 23.1 per cent, while costlier ones are taxed at 29.58 per cent.
Ready made clothes
Under GST: Costing up to Rs 1,000 will be taxed at 5%, while others will be taxed at 12 per cent.
Gold
Under GST: 3% on gold, silver and processed diamond while 0.25 per cent on rough diamonds
Current status: 1 per cent excise duty and VAT of 1 per cent or more.
Revisions in tax rates of some items under GST:
Solar panels: 5%
Mixed edible oil: 5%
Geometry boxes and erasers: 12%