The much talked about GST is very close to its implementation. With the most recent meeting revealing the rates on a few other goods and services, the more prominent ones being the rates on gold, jewellery, textiles and yarn, surely it is important to review them. Also let us have a look at the other sectors being effected by GST.
With only a month left for the ‘Goods and Services Tax’, the GST to start showing its contribution to the economy of India, people from all sectors in the country are eager to realise its true effect. Prime Minister Modi has already laid down multiple strategies for beginning the change in the country that people have been looking forward to since many years. PM Narendra Modi, very recently pitched GST as among the most historic business reforms in India and urged German investors to make use of one of the most liberal FDI regimes in the world. While addressing the IndoGerman business forum in Berlin, he said “We are on the path of making India a global manufacturing hub… India is already the sixth largest manufacturing nation in the world… India remains a bright spot in the subdued economic landscape across the world.” Surely from the confidence that shows in the Prime Minister’s words, it is indeed encouraging for the citizens of India to embrace the changes due to GST, just like the people have embraced the change due to Demonetisation. The reforms for GST are being updated with every single meeting being held, so it’s essential we have an analysis of the decisions taken in these meetings. Let us have a look at the various aspects and structure of GST and the outcomes of the meetings.
Goods and Services Tax (GST) seeks to replace multiple central taxes such as excise duty, countervailing duty, cesses and state taxes including value-added tax, octroi, purchase tax and luxury tax with a single levy. The GST Council has decided upon a four slab structure for both goods and services, with the rates being 5%, 12%, 18% and 28%. Luxury and sin goods such as tobacco face an extra cess. A cess on certain goods will also be levied to create a fund for compensating states for any revenue loss in the first five years of the new tax regime.
The bills are the Central Goods and Services Tax Bill (CGST), the Integrated Goods and Services Tax Bill (IGST) the Goods and Services Tax (Compensation to States) Bill and the Union Territory Goods and Services Tax Bill (UTGST).
The Goods and Services Tax (GST) has been one of the key things that has caught the attention of the market given its implications on earnings of companies. The government has kept a large number of items under 18% tax slab. The government categorised 1211 items under various tax slabs.
Below is a list of some of the notable goods :
| Yarn & fabrics cotton | 5% |
| Textile | 5% |
| Readymade garments | 12% |
| (Apparel below Rs.1000) | 5% |
| Biscuits | 18% |
| Gems&Jewellery | 3% |
| Diamonds | 3% |
| Rough diamond | 0.25% |
| Gold&Silver | 3% |
| Beedi (without cess) | 28% |
| Manmade fibre | 5% |
| Footware<500 | 5% |
| Footware>500 | 18% |
| synthetic fibre | 18% |
| Packaged food item sold under registered trade mark | 5% |
| Agri machinery | 5% |
| Silk and jute | 0% |
Here is the complete updated list:
No tax
Goods
No tax will be imposed on items like Jute, fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, etc.
Services
Hotels and lodges with tariff below Rs 1,000, Grandfathering service has been exempted under GST
5%
Goods :
Items such as fish fillet, Apparel below Rs 1000, packaged food items, footwear below Rs 500, cream, skimmed milk powder, branded
paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats will attract tax of
Services :
Transport services (Railways, air transport), small restaurants will be under the 5% category because their main input is petroleum,
which is outside GST ambit.
12%
Goods :
Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices,
Bhutia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones
will be under 12 % tax slab.
Services :
NonAC hotels, business class air ticket, fertilisers, Work Contracts will fall under 12 per cent GST tax slab
18%
Goods :
Most items are under this tax slab which include footwear costing more than Rs 500, Bidi Patta, Biscuits (All catogories), flavoured
refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral
water, tissues, envelopes, tampons, notebooks, steel products, printed circuits, camera, speakers and monitors.
Services :
AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under
GST.
28%
Goods :
Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water,
paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher,
weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles,
aircraft for personal use, will attract 28 % tax the highest under GST system.
Services :
5star hotels, race club betting, cinema will attract tax 28 per cent tax slab under GST
Once the bills are passed in by both houses of Parliament, the government will issue a notification after the President’s consent. The states will then pass a separate law — the State GST (SGST) bill — to roll out the reform.
Prime Minister Narendra Modi will take stock of the readiness of the country for the roll out of goods and services tax on July 1. The Centre is in no mood to postpone the scheduled implementation and is making all efforts to ensure that the switchover to GST remains as smooth as possible for both industry as well as consumers. The GST Council has favoured implementation of the new tax system from July 1, but a section of industry and some states such as the West Bengal have demanded that it be postponed to September. Some industrial segments are unhappy with the rates and have approached the government seeking changes.
The government has lived up to being a “people’s government” by taking steps to address the concerns of the individuals after several companies complained about an increase in taxation and a consequent rise in prices when GST is rolled out as expected on July 1.The government shall soon call companies from specific industry groups to explain how the goods and services tax (GST) will lead to a decrease in the taxes they’ll need to pay and hear them out. A major outreach programme has also been drawn up to educate consumers about lower tax under GST. Officials claim that a lot of effort has been made to keep tax rates neutral or lower them under GST. The government made detailed calculations internally before arriving at the rates that were approved by the GST Council.
A committee of officials, from state and central governments, examined the tariff structure of each item before the rates were taken to the
council for its consideration. Industry said the GST will raise levies but the government has pointed out that this will be offset by input credits. It is believed that the tax incidence should not increase as companies will now have the advantage of input tax credit that they did not have earlier. The companies can raise any issues that have at these interactions.
The officials are also expected to carry out an outreach programme to
educate consumers about how prices should drop after GST is rolled out.
The government has already clarified that total tax incidence on commodities such as tea, sugar, coffee and services such as direct-to-home (DTH) broadcast and others would decline.
More than a decade in the making, the GST is expected to shore up government revenue and spur economic growth by 1-2 percentage points. The government has gone on record to state that the tax burden will be reduced, but experts say the GST will stoke inflationary trends in the initial years. Although any change due to the GST implementation might bring about resistance among the Indian crowd initially, however, we should also consider the future prospects of it and the benefits it can bring to India’s economy. Decades later, India has finally got a government like The Modi Government, which, ever since its inception, has been bravely implementing major change-oriented strategies, promising a better India.
Tradewell Securities Ltd 