Maple syrup, pastas and ice creams are not luxury goods but shampoos, liquid soaps, shaving products and shoe polish are.
Maple syrup and a range of pastas from spaghettis to raviolis, all of which are mostly imported into the country and consumed by the elite urban households, will attract 18 per cent goods and services tax (GST) compared with 28 per cent for shampoos, liquid soaps, shaving products and shoe polish.
That’s not all. A quick scan of the classification of goods under different tax rates can leave one bewildered and bemused.
For instance, ice-cream will be taxed at 18 per cent, but custard powder at 28 per cent.
Cakes and pastries, though sinful indulgences, will not attract the 28 per cent tax, described by some in the government as ‘sin tax’ and by others as ‘luxury tax’. Instead, they will be taxed at 18 per cent.
All food mixes, including instant food mixes, soft drink concentrates, ready-to-eat packaged food and milk containing edible nuts with sugar and other ingredients, will taxed at 18 per cent. And, so would supari or a betel nut, excess consumption of which causes mouth ulcers and in some cases even cancers.
In comparison, cocoa products such as cocoa butter, fat and oil, cocoa powder, chocolates and other food preparations containing cocoa are classified as luxury products. Waffles and wafers, if coated with chocolate or containing chocolate, would be taxed at 28 per cent; if they are not, the tax will fall to 18 per cent.
The tax structure is also biased against some coffee products. For instance, extracts, essences and concentrates of coffee and preparations from these such as instant coffee and coffee aroma are to be taxed at 28 per cent.
However, extracts, essences and concentrates of tea used for instant tea, quick brewing tea and tea aromas will attract only 18 per cent GST.
Equally baffling is the 28 per cent GST for razors and razor blades, and kitchen cleaver. Choppers and mincing knives, manicure and pedicure sets including nail files too fall in the 28 per cent category.
But scissors, tailors’ shears and similar shears, spoons, forks, ladles, skimmers, cake-servers, fish-knives, butter-knives, sugar tongs and similar kitchen and tableware will attract the 18 per cent rate.
The rates on individual items were finalised at the recently concluded Srinagar meeting of the GST Council chaired by Finance Minister Arun Jaitley.
While many of these classifications come across as bizarre, the GST Council is not to blame. The distorted structure has been in existence for years – all that the GST Council did was add up the centre excise duty and State value added tax on each item and placed it into one of the four GST slabs that was closest to the sum of the two taxes.
This was done to minimise impact of changes in taxes on different items, and in the process prevent inflationary pressures and protect tax revenues of the Centre and States.
The GST Council in an earlier meeting had decided to have four tax rates – 5, 12, 18 and 28 per cent – for goods. That apart there is an exempt category and also a cess on certain items considered luxury or demerit such as automobiles, cigarettes and aerated water.