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GST rates on hotel tariff cut, pay more now for caffeinated beverages

Aanchal Magazine
Union Finance Minister Nirmala Sitharaman addressing the press Saturday. (Express photo: Tashi Tobgyal)

The Goods and Services Tax (GST) Council Friday slashed tax rates for hotels with tariff of over Rs 1,000 by clubbing categories and moving them down the slabs, and reduced the rate for outdoor catering to 5% from 18% (without input tax credit).

These measures, estimated to result in a revenue loss of around Rs 1,500 crore a year, are expected to give a boost to the tourism and hospitality sectors ahead of the festive season. The decisions were taken at the Council s 37th meeting,

In the rate cut for hotels, the Council decided to lower the GST rate for rooms with tariff of Rs 7,500 and above to 18% from 28% earlier, while those with tariff between Rs 1,000 and Rs 7,500 will attract GST at 12%.

Earlier, GST for hotels was pided among three categories: nil for tariff up to Rs 1,000, 18% for tariff between Rs 2,500 and Rs 7,500, and 28% for tariff above Rs 7,500. The nil category has been retained as it is by the Council. The Council also brought caffeinated drinks at par with sin goods classification of aerated drinks, which are taxed at the peak rate of 28% along with 12% cess under GST. It is expected that drinks such as Red Bull and Monster will be impacted by this decision.

In total, the GST Council tweaked rates for 32 items including 20 goods and 12 services, which will come into effect from October 1. To ease the compliance burden for GST taxpayers, the Council exempted filing of annual returns for taxpayers up to Rs 2 crore turnover.
Finance Minister Nirmala Sitharaman said: There is rate reduction being offered… rate reduction on hotel accommodation service is aimed at boosting hospitality sector.

Finance Minister Nirmala Sitharaman at a press conference ahead of the 37th GST Council meeting, with MoS Finance Anurag Thakur and Revenue Secretary Ajay Bhushan Pandey, in Panaji on Friday. (PTI Photo)

The other big-ticket items of automobiles, biscuits were left untouched as the recommendations of the fitment committee against any rate cut for these items were accepted by the Council. It, however, reduced the cess levied on passenger vehicles with engine capacity 1500 cc (diesel) and 1200 cc (petrol) and length up to 4,000 mm designed for carrying more than 10 persons but up to 13 persons to 1% from 15%.

Other items for which GST rates were reduced included slide fasteners (18% to 12%), mineral fuel (18% to 5%), wet grinders (12% to 5%), dried tamarind (5% to nil), cut and polished semi-precious stones (3% to 0.25%). Also, a rate of 5% has been introduced for specified goods for petroleum operations undertaken under the Hydrocarbon Exploration Licensing Policy (HELP).

In total, the GST Council tweaked rates for 32 items including 20 goods and 12 services, which will come into effect from October 1.

Further, the GST rate for railway wagons, coaches, rolling stocks has been raised to 12% from 5% in a move to address the concern of ITC accumulation with suppliers of these goods.

Revenue concerns weighed strong during the meeting. The 15th Finance Commission made a presentation to the Council, in which it suggested lowering of the legally guaranteed 14% annual growth rate for states in the remaining compensation period of three years till 2022, a state Finance Minister said.

The Commission cited that the rates were fixed keeping in mind the pre-GST rates, which have been lowered significantly. States opposed this strongly by saying that stability in GST rate and structure should be the prime objective of the Council instead of frequent tinkering, another state Finance Minister said.

The Council also announced that the new returns system under GST, which was earlier supposed to be mandatorily rolled out from January 2020, will now be introduced only from April 2020. Discussion on uniform rate for lottery has been referred again to the Group of Ministers, which will meet at the earliest.