The GST rate cut on about two dozen items came four days after Prime Minister Narendra Modi indicated the trimming of the highest tax slab of 28% after the ruling BJP’s recent election losses in the heartland states of Madhya Pradesh, Rajasthan and Chhattisgarh.
NWEW DELHI – The GST Council on Saturday cut tax rates on a number of items, including vegetables, movie tickets, television sets up to the screen size of 32 inches and digital cameras, among others, providing relief to the middle class and farmers ahead of next year’s general elections.
The rate cut on about two dozen items came four days after Prime Minister Narendra Modi indicated the trimming of the highest tax slab of 28% after the ruling Bharatiya Janata Party’s (BJP’s) recent election losses in the heartland states of Madhya Pradesh, Rajasthan and Chhattisgarh.
“All the decisions taken today would have a total revenue implication of approximately Rs 5,500 crore in the whole year,” said finance minister Arun Jaitley, who is also the chairman of the GST Council.
After the 31st meeting of the panel, Jaitley, however, expressed optimism about meeting the fiscal deficit target of 3.3% of the gross domestic product (GDP) in the current financial year.
Hindustan Times reported on Thursday that the government was planning to propose the lowering of the goods and services tax (GST) on a majority of items currently in the highest slab of 28% to 18% to boost consumer sentiment ahead of the Lok Sabha polls as part of a farm-, rural- and consumer-friendly strategy aimed at regaining voters’ confidence.
Jaitley said barring two (cement and automobile parts), all other commonly used items have been removed from the top slab, which will now have 28 items. Now only sin (tobacco and tobacco products) and luxury products are left in that slab and they would remain there, he said.
About a dozen automobile parts and cement, though commonly used, could not be brought down from 28% to 18% because of their huge revenue shares, he said. The total GST collection from auto parts is typically about Rs 20,000 crore in a financial year. The contribution of cement is about Rs 13,000 crore in a financial year.
The council felt that the trimming of these rates could be “too steep at the moment”, Jaitley said, adding that air conditioners and dish washers continue to remain at the top slab because these items are mostly used by the affluent segment of the society.
GST rates on implements often used in agriculture — such as pulleys, transmission shafts and cranks, re-traded or used pneumatic tyres — have been reduced from 28% to 18% to provide relief to farmers. Parts and accessories of carriages meant for differently persons have been reduced from 28% to 5%.
GST on air travel by pilgrims using non-scheduled or by chartered flights will now attract 5% duty for the economy class and 12% for the business class. At present, such flight operations attract 18% GST. The move will particularly help pilgrims taking flights for Mansarovar Yatra or the Haj.
The council has reduced the tax on movie tickets up to Rs 100 from 18% to 12%. Tickets priced over Rs 100 will now attract 18% tax instead of the earlier 28%, Jaitley said, adding that the move will have a revenue implication of about Rs 900 crore.
In a relief to transporters, the council has also decided to reduce GST rates on third party insurance premium of goods-carrying vehicles from 18% to 12%. In order to encourage financial inclusion, the council has exempted services supplied by banks to account holders of basic savings bank deposits under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
The new rates will be implemented after they are notified by the government. A notification is expected by the month-end, finance ministry officials said. Jaitley asked businessmen to pass on the benefits of lower taxes or to face action in accordance with the law.
