Tuesday, December 11, 2018


GST Council recommends lowering of GST rates levied on chocolate, malt
Tuesday, 14 November, 2017, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
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.

Other changes - Rationalisation of GST rates on goods  
From 18 per cent to 12 per cent
    • Condensed milk
    • Refined sugar and sugar cubes
    • Pasta
    • Curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasoning
    • Diabetic food
From 18 per cent to five per cent
    • Puffed rice chikki, peanut chikki, sesame chikki, revdi, tilrevdi, khaza, kazuali, groundnut sweets gatta and kuliya  
    • Flour of potatoes put up in unit containers bearing a brand name
    • Chutney powder
From 12 per cent to five per cent
    • Desiccated coconut  
    • Idli, dosa batter
From five per cent to nil
    • Guar meal
    • Hop cone (other than grounded, powdered or in pellet form)
    • Certain dried vegetables such as sweet potatoes, maniac  
    • Unworked coconut shell  
    • Fish frozen or dried (not put up in unit container bearing a brand name)
    • Khandsari sugar
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.  

Tax slabs

GST (with input tax credit)

Revised GST rates from November 2017


Hotels and lodges with tariffs less than Rs 1,000 per day, in line with the existing tax rates

Five per cent

Restaurants under GST composition scheme – applicable where the turnover of restaurants does not exceed Rs one crore

Uniform tax rate for air-conditioned and non-air-conditioned restaurants, including those at star hotels with tariffs less than Rs 7,500, but without input tax credit

Twelve per cent

Non-air-conditioned restaurants and business class air travel

Hotels with tariffs between Rs 1,000 and Rs 2,500

Eighteen per cent

Air-conditioned restaurants, excluding those in star hotels

Hotels with tariffs between Rs 2,500 and Rs 5,000

Restaurants in hotels, resorts and lodges with tariffs above Rs 7,500 (has input tax credit)

Outdoor catering (has input tax credit)

Twenty-eight per cent

Hotels, resorts and lodges with tariffs above Rs 7,500

Air-conditioned restaurants in star hotels


Source: ICRA Research

According to Pavethra Ponniah, vice-president and sector head, ICRA, said, “As most major inputs for restaurants like grains (not packaged), vegetables, poultry and seafood are exempt from GST, the input credit advantage available for restaurants was negligible.”

“Restaurants were also not passing on any benefit of input tax credit to the consumers under GST. The 12-28 per cent GST earlier had led to a hike in the cost of dining for consumers,” she added.

“This revision in the GST rate for restaurants is positive, as it will bring down the dining-out cost, supporting footfalls and revenues at a time when most organised restaurants are struggling to grow demand,” Ponniah said.

However, Rahul Leekha, director, Coffee By Di Bella, India, said that the very concept of GST was detrimental to ITC, which was to prevent the cascading of taxes.

“Denying the fact that the ITC benefit goes against the very essence of GST and will push up the costs by 10 per cent, which will be passed on to the menu price,” he added.

“So, effectively the consumer’s pocket will get a marginal benefit and will not be as it seems. This move is also retrograde to bringing in players in the organised segment,” Leekha said.

Rationalisation of certain exemption entries
The existing exemption entries with respect to services provided by fair price shops to the Central government, state governments or governments of Union Territories (UTs) by way of sale of foodgrains, kerosene, sugar, edible oil, etc. under the public distribution system (PDS) against consideration in the form of a commission or margin, are being rationalised so as to remove the ambiguity regarding list of items and the categories of recipients to whom the exemptions are available.

The council has also clarified that a circular will be issued clarifying that processed products such as tea (i e black tea, white tea, etc), processed coffee beans or powder, pulses (dehusked or split), jaggery, processed spices, processed dry fruits, cashewnuts, etc. fall outside the definition of agricultural produce given in Notification No 11/2017-CT(R) and 12/2017-CT(R), and therefore, the exemption from GST is not available to their loading, packing, warehousing, etc.
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