"For service providers, it is going to get troublesome", said Saloni Roy, a senior director at tax consultancy Deloitte Haskins & Sells LLP.
Meanwhile, it was decided that foodgrains will be cheaper from July 1 when the Goods and Services Tax (GST) is rolled out. The GST rates will vary from 5%, 12%, 18% and 28% depending upon the product. Meanwhile, tooth paste, soap and hair oil would be charged at 18 per cent.Here are 10 updates:almost 81 per cent of products under the GST would be charged below the 18 per cent bracket, said Revenue Secretary Hasmukh Adhia. Till now both the staples invited taxes in different states between 1 and 5 per cent. Milk has been added to the exempted category though in states like UP it was not taxed.
Considering GST will subsume infrastructure-cess now levied on domestic passenger vehicle industry, proposed tax rate for small auto is likely to be price neutral.
While the rate proposed for cinema halls is lower than 40 to 55 percent as per current incidence, it may not result in a reduction in tariffs on cinema tickets as states continue to hold right to levy local charges on them. Around 400 items are now exempt from excise and VAT under the existing indirect tax regime. Five percent GST to be levied on cab aggregrators like Ola and Uber, the FM said.
"Services, which are at now taxed 15 per cent will be fitted into the 18 per cent bracket". Another 17 per cent items are in 12 per cent tax bracket, 43 per cent in 18 per cent tax slab and only 19 per cent of goods fall in the top tax bracket of 28 per cent.
In the current system, work contractors were paying a lot of embedded taxes.
The other items which will be exempt from tax are being deliberated upon.
Echoing his views, Emami CEO (finance, strategy and business development) said: "It appears that the rate will benefit us and the industry, but we need to understand GST (rates) in entirety to comment on the subject".
According to sources, Jaitley asked the states during the meeting to keep exemptions to the bare minimum.
Sachin Menon, National Head, Indirect Tax, KPMG in India: Multiplicity of tax rates for services will add complexity to the compliance in GST regime.
Jaitley said the rates on the remaining items will be decided in the Council's meeting on Friday.
The Goods and Services Tax (GST), set to be launched from July 1, will have rates of 5, 12, 18 and 28 percent for services, in line with those applying to goods.
"The enactment of the State Goods and Service Tax will be the begining of a journey". Automobile and cement companies will likely pass on the higher taxes to consumers.
The final rates have been fixed in a way such that the impact on inflation as well as revenue to the government is near neutral. Most of the states in the country have already passed the state GST bills.
The next meeting of the Panel will be on June 3 to decide the rate of Gold and precious metals.