It is expected that GST will bring down prices of most commodities, marginally.
The much awaited GST rates are out. This has given a much needed sense of relief to the taxpayers planning the upcoming indirect tax regime. It is now clear to a considerable extent as to what impact the GST will have on various commodities and what will be its price difference from the existing tax system.
The GST Council meet held at Srinagar has put over 1,200 goods and 500 services in four tax slabs of 5%, 12%, 18%, 28%. The GST council has adjusted most of the commodities to their nearest tax percentage in the existing system and has not gone for drastic changes.
Daily necessities like fresh milk, bread, vegetables and fruit will continue to be exempted from the tax system and will attract no tax. Some of the states earlier had the power to levy purchase tax on such items which no longer would exist in the GST.
As the nation is gearing for the GST roll out on July 1, companies selling the electronics have started offering mega discounts to clear the remaining stock. The GST will attract increased tax percentage on the consumer durables. Especially when it comes to large appliances such as ACs, Refrigerators, Televisions, Washing Machines.
The proposed GST will see an increase of at least 4-5% tax on large home appliances. Therefore it’s to understand that GST will inflate the prices of those items. Industry experts believe that sales of such items will be impacted with the implementation of GST from July to August. However that might be further rationalised with the festive season ahead.
Industry bodies related to smartphones had raised their concerns on the increased tax rate from 5% to 12%. The Government, in its clarification, has responded through a PIB report saying, “Smartphones attracts 2% central excise duty. VAT rates vary from State to State from 5% to 15%. Weighted average VAT rate on smart phones works out to about 12%. Thus, the present total tax incidence on smart phones works out to more than 13.5%. As against this, the proposed GST rate for smart phones is 12%.” Therefore it is safe to assume that smartphones will get cheaper.
The proposed GST will see an increase of at least 4-5% tax on large home appliances
Cars as a whole, will attract the highest slab of 28%. However, there have been distinction made depending on the size of the engine and length of the car. And higher the engine size and car length will attract higher additional compensated Cess on top of the 28% GST slab. Small cars will be charged 1% cess, mid-sized cars will come under 3% cess while luxury cars will attract the 15% cess. Aerated drinks will attract higher tax slab of 28% along with the additional cess of 12% which will get the total tax burden at 40%, which has worried the Indian Beverage Association (IBA). In a statement issued by them, the IBA said, “This increase will have a negative ripple effect and hurt the entire ecosystem of farmers, retailers, distributors and bottlers in India. This increase in tax will further limit the growth of the beverage industry.” They also added that, “Imposing cess on non-aerated flavoured water and nutrition drinks was not in line with the stated intentions of levying cess only on aerated drinks.”
Personal care items like shampoo, perfumes and make-up items would get costlier as the GST tax rate will go up to 28 per cent, from the existing 22 per cent. While processed food items, ice cream will get cheaper.
As the GST bill is poised to become reality soon, we look at how various services havr been distributed amongst the four different slabs as against the single slab in the existing system. Setting of slabs has been done based on the nature of the service such as transport of goods by air, railways, roadways are at 5%. Similarly air travel on economy-class is set to get cheaper along with hiring a taxi for which the tax has been brought down to 5%.
Restaurant having central air conditioning facility with liquor licenses will attract 18% GST rate. While non-ac alcohol serving restaurants and Telecom services will come under the 12% slab. Five star restaurants, entertainment events will attract the higher slab of 28%.
The Government has also allowed continuations of certain exemptions on services which currently exist like services provided by educational institutions and healthcare services from clinical establishments, authorised medical practitioners and paramedics. Although the nominal percentage on services has increased, experts believe the prices will come down as the service sector will now be able to get input credits to a large extent.
Goa prepares for GST
The Goa government has confirmed that 73% of the businesses have complied with the registration of the GST and by June 15 the registration process will be completed. The Government has also assured of putting an advisory team comprising of tax consultants, chartered accountants and other experts on the GST in every taluka who would be found at a predefined place. The handholding exercise will continue for at least 3 months from the GST implementation. Further, free consultation team will be available at every district Taluka headquarter.
CM Manohar Parrikar speaking with media persons on the new tax regime confidently said, “When it comes to Goa, GST will improve state economics to the extent which we had never thought of.” He added, “GST will be a game changer only when it will be smoothly transferred from the current system to the new tax regime. In real terms, benefits of the GST will be seen within 3-4 months of its implementation, which will bring down prices eventually.”
The textile industry has welcomed the 5% GST tax rate on garments costing less than `1000, while clothes pricier than that would attract 12%. Similarly footwear costing below `500 will come under 5% and rest is fixed at 18%
Business Goa got an exclusive interview with Panchayat Minister Mauvin Godinho who had attended crucial GST council meet at the Srinagar on behalf of Finance Minister Manohar Parrikar.
How do you think the GST will facilitate the Ease of Doing Business in Goa?
GST will definitely help in improving the ease of doing business in Goa. It will create a healthy atmosphere not just in Goa, but in the entire country. Imagine what a game changer the GST is for such a large country as ours. The new indirect tax which will subsume all other taxes will itself augur well for our country. When you introduce something new, there’s always the apprehension that it may or may not work. How will the people, industries take it? I think as you move along and try to understand the GST better, then the industries will realise that it has been brought in to help them as the whole of India will become one market. And Goa will benefit even more as we are a service oriented state. Wherever there are more services offered, that state will benefit. There are also apprehensions among the manufacturing states. But in the end of it all, they know that they will get the input tax credit.
Which issues did you raise at the GST Council meet at Srinagar?
The meet was for the fixation of the rates of taxes for different goods and services. I took up all points which our CM and Finance Minister Manohar Parrikar had asked me to. The GST Council took the cognisance of those points and they acted upon it. We had specifically suggested with regards to compensated Cess – if the states don’t incur losses then whatever the remainder of those funds, after 5 years, should be returned back to the states and the GST Council readily agreed to our suggestion