The highest tax bracket of 28 per cent has been rationalised further with rates on daily-use items like perfumes, cosmetics, toiletries, hair dryers, shavers, mixer grinder, vacuum cleaners, lithium ion batteries, being lowered to 18 per cent. The revised tax rates will come into effect from July 27.

"Every state wanted that the rates on these items be lowered so that the middle-income households are benefitted ... It has also been decided that the GST Council will rise above revenue consideration and focus more on job creation and economic growth," Finance Minister Piyush Goyal said.

Refrigerator, washing machine, small screen TV, storage water heaters, paints and varnishes, will henceforth attract 18 per cent GST as against 28 per cent at present.

Tax rate on ethanol has been slashed to 5 per cent from 18 per cent at present.  

Footwear costing up to Rs 1,000 will now attract 5 per cent GST. So far, footwear up to Rs 500 attracted 5 per cent GST, and those having retail sale price of over Rs 500 attracted 18 per cent rate.

Sanitary Napkins, which attract 12 per cent tax, and fortified milk, which was taxed at 18 per cent, have been exempt from the new indirect tax.

Also, idols made of stone, marble, wood, rakhi not embedded with stone, phool jhadu, sal leaves, too have been exempted.  

In his first GST Council meeting since he took charge as the Finance Minister in May this year, Goyal also allowed businesses with turnover of up to Rs 5 crore to file quarterly returns -- a move which will benefit 93 per cent of the GST registered taxpayers. They will have to, however, pay taxes monthly.

So far, businesses with turnover of up to Rs 1.5 crore were permitted to file returns quarterly.

"Today's meeting has taken a number of decisions unanimously. Simplification and rationalisation has been given maximum priority," Goyal said while briefing reporters after the 28th GST Council meeting here.

Asked about the revenue impact of the tax rate cut, Goyal said it will only be "nominal".

"With simplification, there will be compliance buoyancy and the overall assessment will show that the revenue impact is marginal," he said, adding the revenue foregone is for the good of consumers.

Sources, however, said the tax rate reduction is likely to cost around Rs 8,000-10,000 crore annually to the exchequer.

In the services sector, the hotel industry too has been given major relief as GST on accommodation service will now be based on transaction value instead of declared value.

GST at the rate of 28 per cent in levied if hotel room rent exceeds Rs 7,500. Between Rs 2,500 to below Rs 7,500 GST is levied at 18 per cent and that of Rs 1,000 and below Rs 2,500 it is 12 per cent.

Also, the tax rate on supply of e-books has been cut to 5 per cent from 18 per cent.

Union Minister Arun Jaitley said the rate reduction will go a long way in pushing productivity upward.

"This is a major step towards rationalising the 28 per cent tax slab, which has been narrowed to only a few commodities in the past 13 months," Jaitley tweeted.  

The Council has also decided to defer implementation of reverse charge mechanism (RCM) by a year to September 30, 2019. The RCM, which was already on hold till September 2018, is considered as an anti-evasion tool.

The Council has also cleared over 40 amendments, including increasing threshold for composition scheme to Rs 1.5 crore and allowing multiple registration for businesses, to the GST law.

The next meeting of the Council is slated on August 4, which will discuss issues relating to the MSME sector as well as ways to incentivise digital transaction via Rupay cards and BHIM app.

A Committee led by Bihar Deputy Chief Minister Sushil Modi will look into ways to promote digital payments using these modes.

Also, a chance will be given till August 31 for businesses to migrate to the GST regime and late fee would be waived, Goyal said.

EY Partner Abhishek Jain said: "Reduction in ethanol GST rate for use by oil companies is welcome as major petroleum products are outside GST, and this should help reduce their cost". 

This is the fourth time since the roll out of the GST that the Council, chaired by Union Finance Minister and comprising state counterparts, has rationalised rates.

In its meeting in November last year, the Council had reduced rates in over 178 items in the 28 per cent tax bracket.