In a major relief to the food industry, the Goods and Service Tax (GST) Council, at its 23rd meeting in Guwahati, held recently, recommended reductions in the GST rates levied on a number of goods and services, including chocolate and malt, amongst others.
“This was done to rationalise the rate structure with a view to minimise classification disputes,” stated the Council, adding that it had also recommended the issuance of certain clarifications to address the grievances of traders on issues relating to the GST rates and the taxability of certain goods and services.
On the services side also, it recommended changes in GST rates to provide relief to restaurants.
The goods on which the Council recommended a reduction in the GST rate from 28 per cent to 18 per cent include cocoa butter, fat, oil powder, extract, essence and concentrates of coffee, miscellaneous food preparations, chocolates, chewing gum/ bubblegum, malt extract and food preparations of flour, groats, meal, starch or malt extract, waffles and wafers coated with chocolate or containing chocolate.
Feeling relieved on the reduction of the taxes on chocolate, chef Bunty Mahajan of Deliciae Patisserie, said, “Twenty-eight per cent was honestly too high for the chocolate category, and too big a jump from 12.5 per cent value-added tax (VAT).”
“Charging customers 28% on the sale of chocolate had a negative effect for us during Diwali, as that was when most of the gifting took place. I am happy to see a rate reduction, and confident that it will have a positive impact on the corporate and wedding gifting business,” she added.
Sagar Kurade, managing director, Suman Projects Consultants Pvt Ltd, and former president, All India Food Processors’ Association (AIFPA), has termed the decision as a step in the right direction.
“It is great that the government has realised that food should be placed in the lower tax bracket, and the food products have largely been placed in the lower tax rate now,” he added.
However, Kurade stated that issues related to branded and unbranded products attracting different rates and higher rates on certain machinery used in processing units still remain unresolved.
Besides, the GST council has taken decision to change the rates of GST levied on certain services for all stand-alone restaurants, irrespective of whether they are air-conditioned or otherwise, and now it will attract five per cent without input tax credit (ITC).
Food parcels (or takeaways) will also attract five per cent GST without ITC. Restaurants in hotels having room tariffs of less than Rs 7,500 per unit per day will attract five per cent GST without ITC.
Restaurants in hotels having room tariffs of Rs 7,500 and above per unit per day (even for a single room) will attract 18 per cent GST with full ITC. Outdoor catering will continue to be at 18 per cent with full ITC.
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