PM Modi to vet rates ahead of GST Council meet

Sources say contentious issues include rates for bidis, cigarettes, biscuits, edible oil, jewellery

Prime Minister Narendra Modi is likely to chair a meeting of government officials early next week to review the fitment of items in tax slabs before these go to the all-powerful Goods and Services Tax (GST) Council for the final approval.

The Rajya Sabha had on Thursday cleared the integrated, central and Union Territories GST Bills and compensation Bills after the Lok Sabha passed them last week. The next step for the GST Council is to clear the fitment of various commodities and services into five slabs (including zero-rated products) and four pending rules on composition, valuation, input tax credit and transition.

Business Standard has learnt that senior officials from the finance ministry and Prime Minister’s Office (PMO) will meet in South Block to review the process. The meeting will end with the PM reviewing the process. He might provide inputs on contentious items, government sources said.

“The upcoming meeting has been scheduled for early next week. We were waiting for the Bills to pass. This will be the final action by the central government before the fitment of rates gets the GST Council’s approval,” said a senior official. States are now required to pass their own GST Bills because they will not be able to charge indirect taxes on products and services after September 16.

Sources say the contentious issues include rates for bidis, cigarettes, biscuits, edible oil, pharmaceutical products, medical devices and jewellery. The fitment committee is learnt to be divided on the rate structure for bidis. The current tax rate is 19.8 per cent, making it closer to the 18-per cent slab decided by the Council.

However, the finance ministry is said to be in favour of classifying bidi as a demerit item with a tax incidence of 28 per cent plus cess on account of public health concerns. Health lobbies are also seeking clarity on tax rates for chewing-tobacco.

Fast-moving consumer goods companies are lobbying to get biscuits taxed in the 5-per cent bracket under the essential products category, based on nutritional value and mass consumption. 

Companies also want clarity on the nomenclature division of refined oil and hair oil. Kerala Finance Minister Thomas Isaac said coconut oil should be taxed as an edible product, categorising it as an essential commodity.

Pharma companies are of the opinion that as the current rate of tax on pharma products is approximately 9.4 per cent, any increase beyond 10 per cent would have a negative impact on public health at large. They have argued that certain life-saving drugs should continue to be exempted under GST as well. Life-saving drugs enjoy exemption from the central excise duty and countervailing duty.

Besides, companies lobbied to include infant food in the essential list of goods, arguing that “these products provide a balance of protein, mineral and other nutrients”. Medical devices, currently taxed at 9.9 per cent, should not go beyond 10 per cent, companies have argued.