Tea, coffee and milk powder will all attract a lower tax rate in the goods and services tax (GST) regime together with other essential items, the government said on Thursday, 25th May 2017. Currently, several commodities are subject to the cascading effect resulting in a higher tax incidence. For example, sugar currently attracts a central excise duty of Rs71 per quintal in addition to a sugar cess of Rs124 per quintal.
This translates into an ad valorem rate of more than 6%. This is further compounded by central sales tax (CST), octroi and entry tax, which take the total tax incidence to more than 8%. The GST rate of 5% on sugar compares favourably with the prevailing rates by nearly 3 percentage points.
Additionally, milk powder, an essential ingredient in tea and coffee-based beverages, will be levied with 5% tax under GST compared with the prevailing incidence of 7%. Currently, while milk power attracts zero central excise duty, it attracts 5% value added tax (VAT). Besides, it is levied with embedded taxes in production of milk powder and the incidence on account of CST, octroi, and entry tax, amounting to a final tax incidence more than 7%.