Eating at small hotels and restaurants likely to get cheaper once GST kicks in

business

Updated: Apr 26, 2017 11:38 IST

With the decks being cleared for the July 1 rollout of the Goods and Services Tax (GST), eating out and mobile internet, among other things, are set to get cheaper.

The Centre and states came to an agreement on Saturday on two draft laws which are needed to trigger the country’s biggest tax reform.

Under the GST norms, restaurants with an annual turnover of less than Rs 50 lakh will be able to avail of a composition scheme and pay a flat tax of 5% (2.5% central GST and 2.5% state GST) as the GST Council decided to widen the ambit of this scheme.

How will GST affect you GST will have a 4-slab structure of 5%, 12%, 18% and 28%.

0% tax essential items including rice and wheat, which constitutes 50% of CPI inflation basket.

5% on items of mass consumption such as spices, tea and mustard oil.

2 standard rates of 12% and 18% covering most manufactured items and services.

28% on luxury cars, pan masala, tobacco and aerated drinks.

Successive governments have pushed to implement the GST, which will create a common market and help lower the tax burden, shore up government revenues, temper inflation and boost economic growth by 1-2 percentage points, analysts say. But political differences over how to divvy up GST revenues or compensate states for lost income because of the new tax held up progress.

Once the tax reform comes into effect, consumers will pay a single and transparent tax proportionate to the value of goods and services. At present, they pay higher taxes as multiple levies are imposed – one over the other – at various stages starting from production to the retail sales.

The proposed GST will have four tax slabs. Farmers and small traders are exempt.

“The applied rates will be 5%, 12%, 18% and 28%. The cap will be on the higher side,” finance minister Arun Jaitley said without elaborating on the higher limit. States want the higher limit set at 40% to obviate the need to go to Parliament every time taxes have to be raised on certain goods and services.