Unveiling the GST Tax Rates

GST or the Goods and Services Tax is one of the much awaited and biggest tax reforms in India in last 70 years. GST claims to unify all the taxes levied throughout the country in a bid to eradicate inflation and induce economic growth. On 3rd of November, 2016, the GST council decided to get rid of the “the rich get richer and poor get poorer” catchphrase in India, as it revealed its four tier tax rates, applicable from the month of April.

So, what does the council has for the country folks?

The tax system has been categorised into four range i.e. 5%, 12%, 18% and 28% (steeper to the pre-proposed 6%, 12%, 18% and 26%). Let us apprehend them for a better understanding:

The 5% slab: The GST council has been very keen on eradicating inflation. as it has cut out the taxes levied upon grain and food (which constitutes up to 50% of the consumer inflation basket). To add more to it, the 5% tax slab is levied upon the common use products, in comparison to the earlier 9%.

The 12% & 18% slab: The two standard rates that would be applicable upon bulk items such as processed products, oils, soaps, etc. will be further categorised in the upcoming session as which commodity falls in which slab.

The 28% slab: The council has been keen on uplifting the economic equality, as the top percentile slab will be applied upon luxury and white goods along with tobacco and aerated drinks. An addition cess will also be implied on these goods to compensate for the rollout losses.

Another rate slab is yet to be decided for gold and other precious metals, which is likely to be around 4% (as proposed earlier). (Source: Economic Times)

Though these slabs are yet to be approved by the Parliament, the GST council has put their best foot forward to get rid of the indirect taxations in an attempt to gain a steady control over the administration of the overall tax system. 

Restrainers:

• An amount of 50,000 crore would be needed to compensate for the loss that the states had to bear from GST rollout, for which a lapsable clean energy cess and additional cess will be levied for the initial five years, said the Finance Minister. (Source: TOI)

• The service tax shoots up to 18% from the previous 15%.

• It may take a considerable amount of time for the governments as well as the common people to acclimatize with the new system.

However, these restrainers are momentary and assure long-term benefits for both the common man and the government. And, the council is more likely to get into training and testing mode in preparation of the new taxation system, that could be the game changer for a developing nation like India. 

Disclaimer: All the views, opinions and information expressed in this blog are those of the author and its sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.

GST council sanctions last two draft bills, limits cess on demerit merchandise

In a subversive move, the Goods and Services tax (GST) council on Thursday approved the last two remaining draft bills for State Goods and Services tax (SGST) as well as Union Territory Goods and Services tax (UTGST) and restricted the cess on cigarettes (290%), aerated drinks (15%) and luxury automobiles (15%).

Sliding an inch closer to the July 1 rollout date, the council cleared the remaining two GST bills to implement the biggest tax reform of the country paving its way into the state and parliament legislative bodies. The council’s approval of these two bills is being deemed as a landmark development in the country’s exhaustive journey to implementing a unified tax system, according to experts.

The council also approved to limit cess on demerit (and luxury or sin) merchandise. The newly introduced cess rates are as follows:

• For automobiles and aerated drinks (colas), the cess has been limited at 15% meaning that the total tax on cars and sweetened beverages cannot go beyond 43% (28% cess + 15% cess).
• For cigarettes and other tobacco products, the cess can be either 290% or 4,170 INR per 1000 sticks or a combination of both.

Admittedly, these newly introduced cess rates are just qualifying provision, since the actual tax rates could be lower, and the decision rests solely on the GST council. 

Interestingly, the GST council has also decided to introduce a qualifying provision cess rates on all the automobiles and not just luxury automobiles. This infers that the council could decide to levy cess on non-luxury automobiles as well at a later date, which can be over and above the 28% tax rate.   

For goods produced in SEZ (special economic zones), the council has decided to levy tax rates that are similar for exports. Procurement of goods by SEZs would be zero-rated, whereas in the previous draft, SEZs were required to pay the tax first before claiming refund. 

“In the previous meetings, the GST council already cleared bills for state compensation (for revenue loss that would occur while transition to GST reform), Integrated GST (IGST) and central GST (CGST),” said Finance Minister Arun Jaitley, who heads the council.  

Four of the proposed bills excluding the state GST bill will be put forward for Union and Lok Sabha cabinet’s approval, whereas the state GST draft will need approval by state legislatures.  

Further, it is expected that the NDA government would table the proposed bills in the current budget session as revenue bills for smooth passage into the parliament house. 

The bills are expected to eradicate tax hurdles across states and include certain indirect taxes to be levied by the states and centre subsuming luxury tax, entry tax, entertainment tax, value added tax (VAT), service tax and excise duty. 

Next, the council has to validate nine sets of taxation rules along with wrapping up the tiring task of allotting various goods and services into different tax buckets. 

These rules along with the ones on input and valuation tax credit, invoice returns, refunds, payment, and registration will be decided in the next GST council meet on March 31. 

“We have set aside sufficient buffer time to decide the rates for different tax slabs to ensure that we meet the July 1 rollout deadline,” added Mr. Jaitley.  

Bottom Line:

Industry and tax experts opine that the government should quickly release all the approved GST tax rates and slabs along with accompanying schedules and rules in order for businesses to evaluate the final impact of GST tax reform and align critical business processes around it.

Disclaimer: All the views, opinions and information expressed in this blog are those of the author and the respective sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd. 

Source: Firstpost and Livemint

GST: What it means for the Common Man?

With the Rajya Sabha passing all the four GST bills in the parliament a week back, the nation’s biggest and revolutionary tax regime GST (Goods and Services Tax) is all set to become a reality soon. Boasted as the most subversive tax reform in the country after independence, GST is expected to curb transactional costs by introducing a unified tax system stirring economic growth in the long run.

With the prospects that GST would improve the GDP by a couple of percentages, the reform in its entirety might come with a mixed bag of surprises for the common man.

Talking about its long-term impact, GST should mark a positive impact on most sectors. Based on the GST implementation experience derived from other nations, India might experience an inflationary impact especially during the transition stage, which is expected to fade with the rollout of measures such as anti-profiteering.

Yes, with the inclusion of anti-profiteering along with other counteractive measures, GST should lead to reduced cost for most of the supplies to the end-users in the long-run.

Here’s a quick look at what the GST could mean for the common man:

Services that are likely to become expensive include:

• Mobile phone bills
• Premiums for life insurance plans
• Investment management and banking services
• Online ticket booking services
• Basic luxuries such as DTH services
  

Prices of the following essential services are also likely to go up:

• Healthcare
• Residential rentals
• School and educational fees
• Rail/metro commute
• Courier services

Services that might see a price drop in most of the states are as follows:

• As the GST council has decided to include entertainment taxes in GST, movie tickets might turn cheaper in most of the states across the country.
• Dining out in restaurants/hotels may turn pocket-friendly in several states.

Vehicles and certain essential goods to witness price drop:

Under the GST tax system and the current supply chain ecosystem, the following might get cheaper:

• Two wheelers
• Luxury and SUV or premium cars
• Entry level sedans excluding small cars

Minimal impact:

Basis of the current supply chain landscape and other associated indirect taxes, the common man can expect marginal impact on white goods such as:

• Stoves
• Washing machines
• Televisions
• Shampoos
• Toothpastes
• Soaps

Prices of sin goods and aerated drinks to go up:

The government with its determined outlook towards injurious/sin goods, proposed a high tax rates on ‘sin goods’ that include cigarettes, aerated drinks and tobacco products. With a higher tax rate of around 40%, these goods may witness steep rise in their prices.

Here’s the four-tier GST tax rates

Positive impact lurking around the corner, expected in long-term!

Whilst the afore-mentioned forecasts are based on the statements/data released by government officials and authorities, it would be good to wait for the final verdict on the fitment that the GST council and government will release for a wide range of supplies and services. Nevertheless, with the enablement of anti-profiteering and other counteractive measures, GST is expected to curb costs for most.

Disclaimer: All the opinions, views and information conveyed in this blog are those of the author and its sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.

Source:  The Economic Times