Chai -Coffee will be cheaper in the near future. Prices of sugar, tea, coffee and milk power may soften from July as the proposed goods and services tax (GST) will be lower than the present levies.
The GST Council, which finalised the tax rates for most items last week, has fixed the levy at 5% for sugar, tea, coffee and milk powder.
At present, sugar attracts specific central excise duty of Rs 71 per quintal plus a sugar cess of Rs 124 per quintal, which translates to ad valorem rate of more than 6%. Including incidence on account of account of CST, octroi and entry tax, the present total tax incidence would work out to more than 8%, the finance ministry said.
As against this, the proposed GST rate on sugar is only 5%, which is 3% less than present incidence of taxes, the ministry said.
In case of tea and coffee, state VAT at 5% and other taxes works out to more than 7%. As against this, the proposed GST rate for tea and coffee is only 5%.
Instant coffee will attract higher tax rate.
Milk powder is now exempt from central excise duty but VAT at 5% and other taxes adds up to more than 7%, which is higher than the proposed GST rate.