Rate hikes were approved, while exemptions for many items consumed on a large scale were withdrawn. Finance Minister Nirmala Sitharaman chaired the meeting in this regard.
Casinos, online gaming, and lotteries will face a 28% GST, but the GST Council approved the proposal. The compensation window for states was not extended. The GST Council will meet again in August, i.e., 15 more days have been given to it to sort out the valuation mechanism and submit the report.
What becomes expensive?
- leather products, textiles, and solar water heaters, 5–12%
- An 18% tax applies to light-emitting diode (LED) lights and ink for printing and writing.
- Hotel rooms costing INR 5,000 per day, excluding the intensive care unit (ICU), are subject to a 5% tax without an input tax credit.
- E-waste 5–18%
- 5%—Coffee beans, unprocessed green leaves of tea, wheat bran, and de-oiled rice bran
143 items may see an upward revision in GST rates; states to give their views
The all-powerful GST Council has asked for views from states on hiking rates on 143 items, most of which are currently in the 18% slab. The proposal is considered part of a long-considered rate rationalization move under the GST regime to lift government revenues.
Approximately 92% of the 143 items on the list are proposed to be moved from the 18% tax slab to the top 28%tax slab.
It should be remembered that in the months leading up to the 2019 Lok Sabha elections, the GST Council, responsible for overseeing the indirect tax system, made judgments about rate reductions on several of these commodities between November 2017 and December 2018. Rates for reduced items in the November 2017 meeting held in Guwahati and the December 2018 meeting may now be reversed.
The GST Council is rumoured to reform the 5% rate starting next month.
The GST Council is developing ideas to eliminate the 5% charge to boost state government revenue. It is likely to move some mass-consumption goods to 3% and the others to 8%. Luxury and expensive goods are subject to the highest tax under this scheme. According to this scheme, luxury and expensive goods attract the most the highest tax. There is also a list of unbranded food items that do not attract a cess collection. Essential items are exempt from the program. Sources also claim to have raised the 5% slab to either 7%, 8%, or 9% after discussions with the finance ministers of both the Centre and the states. This change in the GST collection is crucial for states to become self-reliant.
Coaching institutions to pay 18% goods and services tax on composite supply
The Central Board of Indirect Taxes and Customs (CBIC) stated that the coaching centres must compulsorily pay a GST of 18% on their bundled supplies and services to the students, termed their composite supply. Students must pay a hefty amount to join such coaching centres, but these institutions deposit GST on individual commodities where rates are comparatively lower, and therefore it causes subdued payments. Such items are bags, books, other stationery, and so on. Vivek Johri, chairman of CBIC, said that these bundled services are called “composite supply.” For instance, he mentioned a tax ignorance case of INR 3.6 crores found by the commiserate Alwar CGST.
The GST Council defers rate hikes on textiles.
At the 46th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and the state counterparts, the council decided to defer the rate hike on textiles from 5% to 12%. The meeting took place in New Delhi on a Friday.
States like West Bengal, Gujarat, Delhi, Tamil Nadu, and Rajasthan have opposed the hike in the GST rate on textiles to 12% from 5%, with full effect from January 1, 2022. They claimed that this rate increase would only make things difficult for MSMEs and make the “poor man’s clothing expensive.”
Delhi’s deputy chief minister, Manish Sisodia, asked for the raise to be withdrawn. He added that Delhi does not favour these moves to raise the interest rate.
Tamil Naidu finance minister P. Thiaga Rajan said that this move to raise should be stalled. The Confederation of All India Traders said this hike would financially affect MSMEs.
New GST Rates Table
| Goods/Services Category | Earlier GST rates (%) | New GST rates (%) |
| Food and Beverages | ||
| 12 | 5 | |
| 18 | 12 | |
| 28 | 18 | |
| Household goods of daily use | ||
| 18 | 5, 12 | |
| 28 | 0,5, 18 | |
| Educational items | ||
| 28 | 12 | |
| 12 | 0, 5 | |
| Medical and health | ||
| 12 | 0,5 | |
| Agriculture | ||
| 12 | 5 | |
| 18 | 12 | |
| Infrastructure, fuel, environment | ||
| 28 | 18 | |
| 18 | 12 | |
| Safety and security | ||
| 18 | 18 | |
| Miscellaneous | ||
| 28 | 18 | |
| 18 | 0,5,12 | |
| Services | ||
| 0 | 0 | |
| 5 | 5 | |
| 12 | 12 | |
| 18 | 18 | |
| 28 | 28 |
July 2022: New GST Rate List
The most significant tax reform in nation, GST, unifies tax code, and reduces the variety of taxes in place during the previous administration. The GST Council meeting is conducted regularly to improve the overall GST rates for multiple goods.
Various states and industries support a decrease in the GST tax rate for different items discussed in the council meetings. According to sources, the finance minister, Nirmala Sitharaman, and her cabinet will likely discuss redesigning the regime’s four slab tax GST rates. The lower rates could be hiked to 6% and 13% from the current 5% and 12%, and the sources also said that the GST rates would be finally merged into a lesser slab. The details on the GST rate hike will be clear in upcoming months.
GST for Loans and Advances
Before GST, an allocation of loans was subject to service tax. Service tax was levied at a 15% rate; GST is now at 18%. Many individuals believe that the higher GST rates by 3% over the service tax rates will cause the effective loan amount to rise. However, some claim that rising GST rates will also raise EMIs. However, it will also be made clear that the GST is not collected on loan repayment or loan interest payments.
Instead of the principal repayment and interest payment amounts, GST is applied to processing fees and any additional fees. The included fees include, among other things, any applicable loan processing and prepayment fees. The GST effect on loans would typically be insignificant because principal repayment and interest payments make up most of the loan repayment. Look at the GST consequences on loans listed below to better understand how it will affect you.
Here is a list of significant loans and their associated GST rates.
- Personal loan—18%
- Home loans—18%
- Car loan—18%
GST on Cars
Since implementing the GST on automobiles, the GST rate for all vehicles used for personal transportation has been set at 28%. In addition, cars are subject to a composition tax on top of the declared GST rates. This resulted in estimating the appropriate GST tax rate for automobiles, ranging from 29% to 50%. However, the tax rates on greener vehicles like electric cars and fuel cells (such as hydrogen fuel cells) are reduced through subsidies.
Indian GST on Gold
Since gold-made articles (jewellery) were added to the GST system, the rates have been reduced to 3%. However, a 5% GST is also levied as a jewelry-creating fee if the manufacturing activity is outsourced to a job worker. The jeweller must claim these manufacturing costs as an input tax credit (ITC), which determines the final bill, on which the buyer must pay only a 3% GST charge. Learn more about the GST on gold and how it affects the gold market.
Real Estate GST
Only purchases of properties still under construction are subject to the GST in the real estate industry. Following the inclusion of real estate under the GST framework, the applicable tax rates on commercial and residential transactions were 12% until March 31, 2019. But, from the very next day, 1 April, the GST rates on residential real estate have been altered to 5% for unaffordable housing properties, while for affordable housing properties, the levied tax rate is 1%. However, the ready-to-move-in property cannot attract any GST. In addition, various building materials used to construct houses/flats that fall under GST are taxable from 5% (sand, marble rubble, etc.) to 28% (cement, etc.).
Products that will probably be introduced under the GST Slab Rates
The government is contemplating several novel strategies to include new products in the GST system. The Finance Minister also suggested that the government can lower the tax rates on some products and bring other goods under the GST. The following products will be introduced under the GST rate slab:
- Petroleum products—Petrol and diesel
- Land
- Electricity
- Others
GST Impact on the Indian Economy
The implementation of GST has upended the Indian economy and was only made possible by combining all taxes on products and services at their net reasonable price. The following is a list of some significant GST rate effects on the Indian economy:
Increase in Production, Increase in Competition
The country’s introduction of the GST has reduced the cost of products and services, meaning that the final consumer is paying less taxes on those items. The scope of increasing output has been observed to be expanded by the GST system, which boosts competition.
Straightforward taxation
A greater degree of tax calculation simplicity has resulted from implementing the single taxation system, GST. The numerous old taxing systems have also been replaced, saving time and money.
Consistent Tax System
Earlier, the many applicable taxes at practically every supply stage confused the taxpayers. However, the GST has created a standard tax system for simple tax collection in the nation.
Growth in exports
The cost of production has decreased ever since GST was introduced to the Indian economy. As a result, there is more competition in global markets, which directly affects exports.
Protest Against GST Rates
Several businesses, including cloth merchants and private security services, protested over the GST rates once it was implemented. While the iron, wire dyeing, and steel traders opposed high GST rates, the cloth merchants protested the new tax system’s 5% sales tax on textiles. Steel traders pressured the government to show that high GST rates and complicated paperwork were to blame for a 40% drop in commerce.
Additionally, due to the higher GST rates imposed on security services, a significant portion of the owners and staff of private security organizations organized a silent protest against the levied GST rates of 18%.
GST on Services Rates
A similar 4-tiered tax structure to that of commodities underpins the government’s implied GST on services. The GST rates of 5%, 12%, 18%, and 28% on products impact customers positively and negatively about services. However, services like those in the healthcare and education sectors were exempt from the GST. NIL, 5%, 12%, 18%, and 28% tariffs on various services are among the GST Council’s passed rate slabs. Some of them are listed below under various headings.
Nil GST
Chargeable services are offered on Basic Savings Bank Deposit (BSBD) accounts opened under the PMJDY (Pradhan Mantri Jan Dhan Yojana)
5% Tax Slab
- Railways—Transportation of goods, passengers
- Goods transported in a vessel from outside India
- Renting a motor cab without fuel cost
- Transport services in air-conditioned (AC) contract/stage or radio taxi
- Transport by air (scheduled)/air travel for purpose of pilgrimage via chartered/nonscheduled flights
- Tour operator services
- Leasing of aircrafts
- Print media ad space
- Participating in newspaper publishing
12% Tax Slab
- Rail transportation of goods in containers from a third party other than Indian Railways
- Air travel excluding economy
- Food /drinks at restaurants without AC/heating
- Renting accommodation for more than INR 1000 and less than INR 2500 per day
- The building being constructed for sale
- IP rights temporarily
18% Tax Slab
- Renting of truck/goods carriage where cost of fuel is included
- Ropeway transportation of both humans and products (with ITC)
- Services supplied to chit-fund
- Job work about the processing of hides, skins, etc
- Manufacture of footwear and clay bricks
- Works contract for roads, bridges, railways, metro, effluent treatment plant, crematorium, etc.
- Work contracts are supplied to central and state governments and local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals, etc.
- Food /drinks at restaurants with AC/heating
- Outdoor catering
- Renting for accommodation for more than INR 2500 but lehan INR 5000 per day
- Supply of food, shamiana, and party arrangement
- Supply of works contract
28% Tax Slab
- Amusement facilities, water parks, theme parks, and thrill rides
- Meals and beverages in AC 5-star hotels
- Residency at five-star or better hotels
