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  3. GST Council cuts tax rates on 178 items from 28% to 18%

GST Council cuts tax rates on 178 items from 28% to 18%

13 Nov 2017 Evaluate

The Goods and Services Tax (GST)) Council, in its 23rd meeting decided to cut rates across the board, including for a range of daily items of consumption, relaxed penalties and tweaked rules to make it easier for businesses, especially small and medium enterprises, to comply. In a major relief to consumers and businesses, the Council slashed the tax rate on 178 items from 28% to 18%. Only 50 items have been left in the 28% bracket that include products in luxury and sin goods category and some with large revenue implications such as tobacco products, automobile, washing machine and air-conditioners, while the slab had 228 items earlier.

The package from the council, which comes into effect from 15 November, is likely to boost consumer demand, reduce disquiet over compliance costs and also lend fresh momentum to the tax reform initiative. The tax rate was reduced on a range of goods, from granite and marble to chewing gum and chocolates, deodorants and detergents. In other relief measures, the council also decided to bring more units within the scope of a special tax payment window for small and medium enterprises (SMEs) called the composition scheme and halved the tax rate allowed under it to 1%. The eligibility threshold for the scheme too has been raised to Rs 1.5 crore from Rs 1 crore now.

The council sought to tackle two major factors that gave GST a bad name-the practice of restaurants not passing on to consumers the benefit of tax rebates that they got in the new system and the rigours of compliance that big and small businesses faced. Accordingly, the GST rate on restaurants has been slashed to 5% for all restaurants without the input tax credit (ITC). The rate for restaurants in starred hotel, which charge Rs 7,500 or more, will remain 18%. Outdoor catering will be taxed at 18% along with ITC.

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