GST (Goods and Service Tax) Roll Out Looks Certain From July 1

GST Roll Out Looks Certain From July 1

After more than a decade of planning and preparation, India looks ready to implement Goods and Service Tax (GST) framework, a comprehensive single taxation system that aims to replace the existing complex system of multiple indirect taxes. The Government has laid down a clear roadmap for GST implementation from July 1, 2017 even though various states have requested the Central Government to push the implementation date till September, citing their logistical unpreparedness. The Government has, however, clarified that the new tax regime will be rolled out from its scheduled date.

Prime Minister Narendra Modi identified this new taxation system as an utmost priority, as he envisaged cutting through corruption and red tape generated due to the swathe of state taxes. The Government has enacted four GST bills.

  1. Central GST (CGST)
  2. Integrated GST (IGST)
  3. Union Territory GST (UTGST), and
  4. Bill to Compensate States.

Most of the goods and services have been classified under four different tax slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent. However, certain items such as small cars and luxury cars will attract 28 per cent (1 or 3 per cent cess) and 28 per cent (15 per cent cess), respectively. Some items such as gold and rough diamonds will attract exclusive tax rates. Some items have been excluded from taxation.

GST Rate Classification for goods

 

Exempt 5 per cent 12 per cent 18 per cent 28 per cent 28 per cent + Cess
Food

 

Grains

 

Cereals

 

Milk

 

Salt

Coal

 

Sugar

 

Tea & Coffee

 

Drugs & Medicine

 

Edible Oil

 

Fruit Juices

 

Vegetable Juices

 

Beverages containing milk

 

Bio-gas fuel

Fertilisers

Capital goods

 

Industrial intermediaries

 

Hair Oil

 

Soap

 

Toothpaste

Air conditioner

 

Refrigerators

Small cars

(1% / 3% cess)

 

Luxury cars

(15% cess)

 

GST Rate Classification for Services

Exempt 5 per cent 12 per cent 18 per cent         28 per cent
Education

 

Healthcare

 

Residential accommodation

 

Hotel/ Lodges with tariff below INR 1000

Goods

 

Transport

 

Rail tickets (other than sleeper class)

 

Economy class air tickets

 

 

Rail Tickets (other than economy class)

 

Construction of building

 

Chit Fund

 

Non-air-conditioned restaurant

Restaurant having licence to serve liquor

 

Restaurant with air-conditioning

 

Hotel/ Lodges with tariff between INR 2,500- 5,000

Cinema

tickets

 

Betting &

Gambling

 

Hotel/ Lodges with tariff above INR 5,000

 Impacts on Indian Economy and Industry

Most economists, global credit rating agencies and financial institutions feel upbeat about India’s new tax reform. According to them, the GST will increase efficiency of the Indian economy and will push India’s GDP growth rate to over 8 per cent. The Small and Medium Enterprises (SMEs), one of the primary growth drivers of Indian economy, will be the major beneficiary, as the new tax regime will increase production and movement of goods and services across Indian states, thereby making the Indian SMEs more competitive against large domestic enterprises, as well as against various competing countries such as China, Bangladesh and the Philippines. The GST will also have a major impact on transportation and logistics, which will bring down operating costs across industries. This will reduce the overall manufacturing costs, thus benefitting the consumers and boosting domestic consumption.

 

Impacts of Goods and Service Tax on Foreign companies 

A successful implementation of GST is poised to make the Government’s Ease of Doing Business dream a reality.  The GST will lower overall tax rates, eliminate multiplicativity of taxes and simplify compliance procedure to increase efficiency, thus giving a level-playing field to the foreign companies already operational or looking to operate in the Indian market. This new tax regime would also end the opaque nature of State and Central tax system, giving foreign companies a transparent and fixed tax structure for almost all goods and services.

Post a Comment