India hikes taxes on household items amid inflation concern

NEW DELHI: India will raise taxes on certain goods and services including kitchenware to 18% from 12%, the finance ministry said in a statement, a move that is likely to upset many consumers and businesses facing rising inflation.

Kitchen utensils, led lights, farm machinery, solar water systems as well as services like work contracts for roads, irrigation projects, hospitals and educational institutions would now be charged at 18% from an earlier rate of 12%, the statement said.

The Goods and Services Tax Council, comprising top federal and state finance ministers, decided to rationalise tax rates on certain goods and services to remove an inverted duty structure, Nirmala Sitharaman, India's federal finance minister, told reporters on Wednesday after a two-day meeting in Chandigarh.

The council also approved an increase in tax on petroleum and coal bed methane to 12% from 5% earlier, besides raising rates for packaged food items. The new rates will be effective from July 18, Sitharaman said.

Analysts said higher taxes would put an additional burden on households already facing a surge in food and energy prices. The tax on agricultural items like packaged cereals, wheat, maize, rice, which are unbranded but sold in a labelled package may increase by 5%, said Vivek Jalan, Partner, Tax Connect Advisory, a tax consultancy firm.

"Edible oils as well as milk products are likely to become costlier as a result of the GST rate increases," he said. India's consumer price index-based inflation rose 7.04% year-on-year in May, after touching an eight-year high of 7.79% in April, but remained above the central bank's tolerance band of 6% for a fifth month in a row.