PANAJI : Federal indirect tax body Goods and Services Tax (GST) Council on Friday slashed tax rates on a host of products and services, including hotel stay and outdoor catering, besides easing the compliance burden for small and medium enterprises. The tax cuts are expected to promote exports and boost economic growth.

The council, however, rejected proposals for tax cuts on automobiles and biscuits, as it wanted to focus on the unorganized sector. Officials said the revenue impact on account of the tax cut has not been estimated, as the cuts applied to several industries.

Finance minister Nirmala Sitharaman, who chaired the GST Council meeting, said the tax rates, as well as slabs applying to hotel accommodation, have been changed.

Hotels with daily tariff of up to 1,000 will continue to be exempted from GST, while those charging 1,000-7,500 will be taxed at 12%. Tariffs above 7,500 will be taxed at 18%. As per the existing slab, tariffs of 1,000-2,500 are taxed at 12%, those levying 2,500–7,500 are taxed at 18% and hotels with higher tariffs are taxed at 28%.

The council also decided to slash the rate on outdoor catering services from 18%, with the benefit of input tax credit, to 5%, without the benefit of input tax credit. Catering in premises with a daily tariff of more than 7,500 will continue to be taxed at 18% with input tax credit.

All rate changes will apply from 1 October. The council exempted small businesses from having to file annual returns for FY18 and FY19. Sitharaman said rules will be simplified further to encourage compliance.

The council also reduced tax rates on a host of services, including work related to diamonds (from 5% to 1.5%). GST on caffeinated drinks were increased from 18% to 28%, on a par with aerated beverages.

Abhishek Jain, tax partner, EY, said: “With the upcoming vacation and festive season, this was a much sought for relief, especially for premium segment hotels."

As part of the government’s agenda of nudging individuals to adopting a healthy lifestyle, the Council decided to increase the tax rate on caffeinated drinks and excluded aerated drinks makers from the concessional flat tax scheme meant for small businesses. Caffeinated drinks will now be taxed at par with aerated beverages, one of the highly taxed items.

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