NEW DELHI/SRINAGAR (TIP): Foodgrain, milk, cereal, toiletries and a bulk of consumer items will become cheaper once the GST regime kicks in on July 1. The GST Council finalised the rates for about 1,200 items on Thursday. The rate for services will be decided on May 18.

On the first day of its two-day session in Srinagar, the council decided that a fifth of all goods sold in India would be taxed below 18%, making most goods cheaper under the GST regime. A few items, however, will cost more.  Talking to reporters after the meeting, Finance Minister Arun Jaitley said, “Tax rates for many items have been reduced.” With a better system in place, compliance will improve, he declared. Jaitley is confident rates for all goods and services would be finalised by Friday. If that doesn’t happen, the session will be extended by a day, he said.

Revenue Secretary Hasmukh Adhia said only 19% of goods on the list would be taxed at 18%, while 81% of goods would be taxed lower. He said sugar, tea, non-instant coffee, edible oil and coal would be under the 5% category, while toothpaste, hair oil and soaps would be taxed at 18%.

The current tax on toothpaste and soaps is close to 28%. In a boost to industry, the tax rate for capital goods and industrial intermediaries was fixed at 18%. The council had earlier decided a five-slab structure of 0%, 5%, 12%, 18% and 28%.

Most luxury goods and sin items were expected to fall in the highest 28% bracket. It was assumed small cars would have a lower tax rate than 28%, but state finance ministers who attended the meeting on Thursday said the item hadn’t come up for discussion. The council approved seven GST rules required for its rollout. The remaining two, related to transition and return, are being vetted by the legal committee, Jaitley said. Jaitley assured Jammu and Kashmir that the Centre would respect its special status while rolling out GST.