Modi govt. has no option but to change GST rates: Chidambaram

Modi govt. has no option but to change GST rates: Chidambaram

The initial 18% tax rates for air-conditioned restaurants and 12% for non air-conditioned restaurants were slashed to 5% GST on all food items from November 15. The GST council has effectively cut the rate on 177 goods.

"The GST Council has made a decision to keep only 50 items, mostly demerit, sin and luxury goods in top 28% bracket", Modi added.

Mr Modi further said that the revenue implication of these will be approximately Rs. 20,000 crore.

A panel, headed by Assam Finance Minister Himanta Biswa Sarma, has suggested doing away with the tax rate distinction between AC and non-AC restaurants not covered under composition scheme.

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13 items have been moved from 18% to 12%, 6 items from 18% to 5%, 8 items from 12% to 5%, 6 items from 5% to nil, the FM said. GST rates for all restaurants will be 5 per cent from now on. At present, while manufacturers pay GST at 2 per cent, the rate for restaurants is 5 per cent. Traders now pay 1 per cent. Jaitley informed that GST rates in respect of restaurants including both AC and non-AC categories have been reduced to uniform five per cent from the existing 18 %.

The GST Meeting also decided that there will no benefit of input tax credit for restaurants. The objective of the optional composition scheme is to bring simplicity and reduce the compliance cost for the small businesses.

This is being considered as one of the biggest tax reductions since the new system kicked-in from July 1.

The "panic-stricken" Modi government will be forced to heed the advice of the Opposition and experts due to the Gujarat Assembly elections next month, he said in tweets. Chewing gum, chocolates, cosmetics like products of facial make-up, shaving, and after-shave items, shampoo, deodorants, washing powder detergent and marble will have lower 18 percent tax rate. "Why is electricity and petrol kept out of GST?" he said.

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