GST Council slashes tax on hotel tariffs; caffeinated drinks to be dearer

Hotel, gems and jewellery, defence and automobile are the key sectors which have been benefited after the 37th GST Council Meeting.

The GST council, however, more than doubled the tax rate on caffeinated drinks bringing it at par with aerated drinks. Caffeinated drinks will be charged 28 per cent plus a 12 per cent compensation cess, a big jump from 18 per cent levied currently.

All changes in GST will be applicable from Oct 1.

The GST council slashed the GST rate on job work in the gems and jewellery sector from 5 per cent to 1.5%. GST on cut and polished semi-precious stones has been recommended at 0.25% from the existing 3 per cent. GST on jewellery exports will be nil, which is expected to give a major boost to the sector and cause a ripple effect.

After GST reduction by the Council, outdoor catering would attract 5 per cent tax instead of 18%.

After yesterday’s announcement, GST on hotel rooms with tariff up to Rs 1000/night will be nil.

GST rate for hotel rooms with tariffs ranging from Rs 10001-7500 per night has been slashed to 12 per cent from 18 per cent applicable now.

Hotel tariffs above 7500 would attract 18 per cent GST instead of 28 per cent charged currently.

The GST Council also recommended lower 12 per cent cess on 1200 cc passenger petrol vehicles and 1500 cc passenger diesel vehicles of length not more than 4000mm designed to carry up to 9 people and more than 10 but up to 13 people.

The council also exempted GST/IGST on specified defence items not manufactured in the country up to 2024.

GST on cups and plates made from hides and leaves has been reduced to zero.

A uniform GST rate of 12% will be levied on woven/non-woven polyethylene bags.

Polypropylene sacks and bags, too, would attract same GST of 12 per cent.

Railway wagons and coaches will now attract 12 per cent GST instead of 5 per cent.

All together rates for 20 goods and 12 services were revised.

According to experts, the reduced GST on variety of items will make very little revenue impact as tax increase is expected to make up the reduction.

An in-principle decision to link Aadhaar with registration of taxpayers under GST was taken. The council also decided to check the possibility of making 12-digit unique identification number mandatory for claiming GST refunds.

Decision in connection with the withdrawal of a circular, imposing GST on additional discount given by a manufacturer to a dealer in some cases, was taken.

Reacting to the GST Council’s decision, Abhishek A Rastogi of Khaitan & Co told media: "The need is to identify those sectors which would lead to employment growth."

"Taxing anything at 28 per cent is not a good sign at all. To make up the numbers, rate rationalisation is essential to merge 5 per cent and 12 per cent to perhaps 8 per cent and 12 per cent and 18 per cent to perhaps 15 per cent," he said.

Dipak Haskar, chairman CII National Committee on Tourism & Hospitality and chief executive of ITC Hotels and Welcome Hotels, said: “The GST rate rationalisation for hotels is an extremely positive development which augurs very well for the Indian tourism industry. We are grateful to the finance minister for having considered this demand of the industry which is bound to create a good sentiment across travel, trade and hotels.”

Abhishek Jain of EY told media: "With the upcoming vacation and festive season, this was a much sought for relief by this industry, especially for the premium segment hotels.

Aligned to this government's agenda of deterring consumption of deleterious drinks, a significant hike in GST has been proposed on caffeinated drinks. This now brings rates on such drinks at par with aerated beverages.”