Foodgrains will cost less from July 1 when the nation-wide Goods and Service Tax (GST) is rolled out as the GST Council today decided to exempt the daily-use commodities from the levy.
The GST rates for all 1,211 items but six were finalised at the first day of the two-day meeting in Srinagar of the GST Council, headed by Union Finance Minister Arun Jaitley and comprising state representatives.
Milk and curd will continue to be exempt from taxation when the Goods and Service Tax (GST) replaced current indirect taxes. 'Mithai' or sweets will attract five percent levy.
Prices of foodgrains, especially wheat and rice, will come down as they will be exempt from GST. Currently, some states levy Value Added Tax (VAT) on them.
Common use products like hair oil, soaps and toothpaste will be charged with a single national sales tax or GST of 18 percent instead of present 22-24 percent tax incidence through a combination of central and state government levies.
Daily-use items like sugar, tea, coffee (barring instant coffee) and edible oil will attract the lowest tax rate of five percent, almost the same as current incidence.
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Jaitley said the tax rate for items that would be decided tomorrow include gold, footwear, branded items and bidi.
Also, the GST for packaged food items is to be finalised.
Tomorrow's meeting will also decide on the rate of tax for services, he said.
Seven per cent of the items fall under the exempt list while 14 per cent have been put in the lowest tax bracket of 5 per cent. Another 17 percent items are in 12 percent tax bracket, 43 percent in 18 percent tax slab and only 19 percent of goods fall in the top tax bracket of 28 percent.
Aerated drinks and cars will be in 28 percent bracket. On top of the peak rate, small cars will attract a one percent cess, mid-sized cars will attract three percent and luxury cars 15 percent.
Jaitley said there will be no inflationary impact as most of the rates which are at 31 percent have been brought down to 28 percent.
Jaitley said the key feature of today's rate decision has been that "tax rate under GST will not go up for any of the commodities. He said, on many commodities, there is a reduction particularly because the cascading effect of tax is gone.