The GST Council would weigh in tax hike on sugary, caffeinated drinks, and pan masala but it is expected that consumers may not feel the pinch. According to sources the upcoming GST Council will deliberate on the Centre’s proposal, which is to replace the current mechanism of 28% GST + 12% cess which equals to 40% GST rate.But, a closer look reveals that the steep hike in GST rate from 28% to 40% might not mean much as the current 12% cess gets absorbed in the GST rate itself. Thus, in conclusion, the total GST would remain 40%, with Centre doing away with the additional 28% plus 12% cess.However, GST rate on pan masala is classified as a “sin good”, so it is subject to the highest GST rate of 28%. The compensation cess is an additional levy on top of the 28% GST rate. The applicable rate would depend on the product category: Pan masala not containing tobacco: 60% ad valorem or 51% of the retail sale price (RSP) per unit, whichever is lower. So GST on pan masala may get lower.
Also read | GST rate rationalisation faces revenue hurdles, retailers urge quick clarityThe GST Council will now meet in New Delhi on September 3-4 and will take a final call on the changes as part of a wider tax rationalisation exercise. The recommendations are expected to be tabled before the Group of Ministers (GoM) on rate rationalisation, ahead of the GST Council meeting scheduled for September 3-4.The move forms part of the Centre’s broader exercise on rationalising GST rates by pruning the number of tax slabs and simplifying the structure. At present, goods and services are taxed under five main slabs — 0%, 5%, 12%, 18% and 28%. The government is exploring options to do away with the 12% and 28% slabs and added cess, while simultaneously restructuring rates across a wide basket of items.Also read | GST rate slab rejig: What likely will become cheaper and expensiveOfficials familiar with the discussions told CNBC-TV18 that the idea behind hiking taxes on items such as pan masala and sugary drinks is two-fold — boosting government revenues and discouraging consumption of products considered harmful to public health. Aerated and caffeinated beverages have faced criticism from health experts for their contribution to rising lifestyle-related illnesses, while pan masala remains under scrutiny due to its links to oral cancer.The final decision, however, rests with the GST Council, which comprises Union and state finance ministers. The Council is expected to take up the proposals during its upcoming meeting, where states will weigh in on the revenue implications as well as the potential impact on industries and consumers.(Edited by : Jerome Anthony)
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