The Goods and Services Tax (GST) Council is going to announce a cut in the tax rates at its Friday meeting on products and services that typically are not major revenue generators for the central and state governments.
Items that are included in a reduction in tax rates like luxury hotels and outdoor catering services, said a person familiar with the deliberations of the Council. The idea is to provide impetus, by way of lower taxes, to segments of industry which are not big revenue contributors.
“A tax rate reduction in these two segments will have negligible revenue impact on the exchequer. On the other hand, a rate cut on products like automobiles will have huge revenue implications for the government. The expectation of a rate cut in the last few weeks itself has hurt the auto industry prompting people to postpone their purchases,” said the person cited above. Luxury hotels which charge a tariff of Rs 7,500 a night are taxed at 28% and outdoor catering services at 18% now.