Union finance minister Arun Jaitley on Friday announced a big overhaul of GST, saying only 50 items will remain in the highest tax slab of 28%, with 178 others moved to the 18% bracket from November 15.
Restaurants in starred-hotels will charge 18% tax with input tax credit, those in lower category hotels to charge 5% GST without ITC, said Jailtey. "All restaurants in the country will be levied GST of 5%; no ITC (input tax credit) benefits to them," added the finance minister after the Goods and Services Tax Council meeting in Guwahati.
The council reduced tax rate on a wide range of mass use items - from chewing gums to detergents -- to 18% from current 28% .
Facing intense heat from opposition-ruled states over keeping mass used goods in the 28% bracket which was meant for luxury and de-merit goods, the Council pruned the list to 50 as against 62 that was recommended by its fitment committee.
The Goods and Services Tax (GST), implemented "from July 1, has five tax slabs of 0%, 5%, 12%, 18% and 28%.
"There were 227 items in the 28% slab. The fitment committee had recommended that it should be pruned to 62 items. But the GST Council has further pruned 12 more items," said Bihar deputy chief minister Sushil Modi.
He said all types of chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoo deodorants, washing powder detergent and granite and marble will attract lower 18% tax rate.
"There was unanimity that in 28% category there should be only sin and demerit goods.
So, today the GST Council took a historic decision, that in the 28% slab there will be only 50 items and the remaining items have been brought down to 18%," he said.
Paints and cement have been retained in the 28% tax bracket, he said.
"Luxury goods like washing machines and air conditioners have been retained at 28%."
The decision taken by the GST Council will have a revenue implication of Rs 20,000 crore annually.
"There is consensus that slowly 28% slab should be brought to 18%. But it will take some time because it has a big revenue implication," he said.
(With PTI inputs)