3rd November 2016 becomes the decisive day for finalization of GST rates in India . The authority to finalise GST rate i.e GST Council concludes its historical meeting on GST rate finalization on 3rd November,2016.
The GST Council
finally zeroed upon various GST rate slabs for levy and collection of
GST taxes on various supplies of goods and services in India.
It
must be noted that the States have also given their consent for levy of
additional Cess on luxury and demerit goods. The levy of additional
cess itself is aimed to create a pool for funding compensation to States
for a period of 5 years.
GST Rate Slabs – The much awaited 4 tier GST rate slab as decided by GST Council are as below :
i. Lowest Slab @5% – Food items and other mass essentials.
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ii. Standard Slab @ 12% – Substantial Goods & Services.
iii. Middle Slab @ 18% – Rest Of Goods & Services.
iv. Highest Slab @28% – Luxury & Demerit goods.
Previous GST Rates Proposal in last GST Council Meeting – In last meeting of GST Council , held between 17th to 19th October,2016,,the Central Government proposed GST rate slabs at the rate of 6, 12, 18 and 26 %.
Hence, the lowest slab is reduced by 1% i.e from 6% to 5%. Whereas, the highest slab is enhanced by 2% i.e from 26% to 28%.
Levy on Precious Metals
The
GST Council could not finalise the GST rate on Precious metals like
gold . Whereas, it must be known that in last meeting of GST Council
,held between 17th to 19th October 2016, it was proposed to be levied @
4%.
Clean Environment Cess – An Additional Cess will
be imposed on luxury and demerit goods . It shall be levied on goods
like selected luxury cars, aerated drink , alcohol, tobacco , pan masala
etc .
Krishan Arora, Partner, Grant Thornton India LLP
said that “While the consensus on rate structure among Centre &
States seems to be a step closer towards timely implementation of GST,
the essence of the multiple split tax rates will need to pass the test
of industry acceptance on grounds of revenue neutrality and zero
cascading across sectors specially goods falling in the 28% bracket.
The
government would need to ensure that multiple rates proposed for goods
and services do not inherit the legacy issues around classification
anomalies. As regards the recommendation of levying Cess on Sin goods
which otherwise seems contrary to the spirit of GST, the logic seems to
be to ensure adequate revenue to Centre for compensating states over
next 5 years, however the same should not adversely impact the ultimate
tax costs of such goods and to the extent possible, should be applied at
last point of supply chain and not distort the overall credit regime.”
Crucial Aspects
The GST Council decided the GST rates with the following crucial factors :
a. Inflation Check – The focus will be to check the inflation and hence essential mass items including food will be taxed at zero rate.
Mr Jaitley emphasized that while
there will be two standard tax rates – 12 percent and 18 percent –
under the GST, half of the items in the consumer price index would not
be taxed at all to safeguard the interests of the poor.
b. Food Items– Special treatment to certain food items is likely to continue and it will be exempted from the tax as well.
c. No Extra Burden of Cess on Consumers–
The levy of Cess will not create an additional burden on consumers in
as much as it shall be levied on those goods which are already
attracting high rates of taxes .
Mr Jaitley also aired that the highest
tax slab will be applicable to items which are currently taxed at
30-31% (excise duty + VAT). Luxury cars, tobacco and aerated drinks
would also be levied with an additional cess on top of the highest tax
rate.
Conclusion
Levy of GST on Services
– GST rate may be between 12% to 18%. However, it must be known that
there are catena of reports on the viability and implication of taxes on
service sector . All such reports have concluded that any tax rate
above 16% will be suicidal for the service industry.
Levy of GST on Goods – It will be very interesting to see the impact of 28% on FMCG goods .
Further, the basket for 5% GST rate will be a real challenge with respect to various goods of mass consumption.
Union
Finance Minister Arun Jaitley addresses press conference on 4th GST
council meet in New Delhi on Thursday. 03rd November 2016.
For an advance level understanding of GST, please keep referring www.gstprofs.in
by Anandaday Misshra, Founder Advocate , AMLEGALS
(
The author is one of the leading litigation and advisory advocate. He
is an eminent speaker and author on various laws including GST. He
handles cases in various Tribunals & High Courts of India. He can
be contacted on anand@amlegals.com .For more, please refer
www.amlegals.com )
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