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Arun Jaitley stubs out cigarettes for India; High tax rate for tobacco products in GST

Aerated drinks, pan masala, luxury cars, tobacco products are to be taxed higher than 28%
Arun Jaitley : Union Finance Minister

The goods and services tax (GST) council on Thursaday finalised the 4-tier rate structure at 5, 12, 18, 28 per cent slabs, taking a step ahead to make India a single market.

According to Union Finance Minister Arun Jaitley, aerated drinks, pan masala, luxury cars, tobacco products are to be taxed higher than 28% as per the new decision, media reports revealed. The council has decided to apply highest tax slab to items which are currently taxed at 30-31%.

The Minister also added that the zero-tax rate will be applied to 50 pc of items including foodgrains used by common man, while 5% duty will be levied on mass consumption items.

The cess on sin and energy cess will be added to state compensation pool and in the first year of GST rollout,  Rs 50,000 crore will be be paid to states for loss of revenue.

The long-delayed GST, which imply a uniform tax rate on a single product or service across India, is expected to increase revenues through better compliance.

Headed by Union Finance Minister Arun Jaitley, the GST Council consisted of state finance ministers. The announced rates are steeper than the Central Government’s proposed tax structure at 6, 12, 18 and 26 per cent, the peak rate being for FMCG and consumer durables.

The GST tax rate must be approved by parliament and Jaitley is expected to seek parliamentary approval for bills later this month. The GST is likely to be a reality from 1 April next year.

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