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The GST—A Brief Outline

A summary of the tax rates under GST in India

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The GST—A Brief Outline

  1. 1. The GST—A Brief Outline The GST Council, the apex decision-making body for the new tax, has fixed the tax framework under the Goods and Services Tax (GST) which is scheduled to be rolled out on July 1, 2017. GST is a consumption- based tax levied on goods and services and is aimed at bringing uniform indirect taxation regime throughout the country. The GST Act allows four tax slabs — 5%, 12%, 18% and 28% for goods and services. The new tax regime will unify India’s economy into a common market, eliminating a series of central and state levies, and is expected to shore up state and federal tax revenues. The GST will be a national sales tax that will be levied on consumption of goods or use of services. It will replace 16 current levies including seven central taxes like excise duty and service tax, and nine state taxes like VAT and entertainment tax. Tax rates have been finalised for 1,211 items with about 81% of items being kept under the 18% slab. The rates have been decided such that There will be no increase in the tax incidence on any commodity, while in many cases, there is a reduction in the rates compared to that under the present system. However, the actual process of transition and finer prints will go a long way in determining whether GST is tax neutral or tax adverse for sectors like financial services and real estate.
  2. 2. The rates decided on Goods Nil food grains, fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, stamps, judicial papers, printed books, newspapers, bangles, bindi.sindoor, handloom etc.  5% edible oil, fish fillet, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, sugar, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, gold ,stents, lifeboats etc.  12% frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, bhujia, namkeen, ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, and cell phones etc.  18% industrial intermediates and capital goods, most manufactured goods, toilet soaps, tooth paste, hair oil, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors etc.  28% aerated beverages, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, ACs, refrigerators, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, and yachts etc. GST on coal has been brought down to 5% from the current tax incidence of 11.69%, thereby making electricity generation cheaper. Luxury cars will be taxed at 28% GST plus a cess of 15%, while small petrol cars will be taxed at 28% GST plus a 1% cess and small diesel cars at 28% plus 3% cess.
  3. 3. Services  Nil (Exempt) Services including health, education, select government services, renting of residential dwelling for use as residence, budget hotels charging less than Rs1,000 a day and services given to international bodies like the UN. Services provided by the Goods and Services Tax Network (GSTN) , the company that provides the IT infrastructure to union and state governments and union territories for the new indirect tax regime. That takes the total number of services out of GST to 83.  5% with No ITC Services of goods transport agency (GTA) in relation to transportation of goods [including used household goods for personal use]; Renting of motorcab ; Transport of passengers, by- (i) Air conditioned contract/stage carriage other than motorcab; (ii) a radio taxi; Supply of tour operators’ services; 5% with ITC of input services Transport of goods and passengers by rail (other than sleeper class); transportation of goods by a vessel from a place outside India up to the customs station of clearance in India; Transport of passengers by air in economy class; Leasing of aircrafts by a scheduled airlines for scheduled operations; 5% with Full ITC Selling of space for advertisement in print media; services by way of job work in relation to printing of newspapers.  12% with Full ITC Transport of goods in containers by rail by any person other than Indian Railways; transport of passengers by air in other than economy class; supply of Food/drinks in restaurant not having facility of air-conditioning or central heating at any time during the year and not having licence to serve liquor; renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having room tariff Rs.1000 and above but less than Rs.2500 per room per day; construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly; Temporary transfer or permitting the use or enjoyment of any Intellectual Property (IP) or permanent transfer of IP.
  4. 4. 18% with Full ITC Supply of Food/drinks in restaurants having air-conditioning or licence to serve liquor or in outdoor catering; Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes where room tariff of Rs 2500/ and above but less than Rs 5000/- per room per day; admission or access to circus, Indian classical dance including folk dance, theatrical performance, drama; Composite supply of Works contracts; and All other services not specified elsewhere. 28% with Full ITC Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go rounds, go-carting, casinos, race-course, ballet, any sporting event such as IPL and the like; Services provided by a race club by way of totalisator or a licensed bookmaker in such club; Gambling; Supply of Food/drinks in air- conditioned restaurant in 5-star or above rated Hotel; Accommodation in hotels including 5 star and above rated hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, where room rent is Rs 5000/- and above per night per room. The Commercial Tax Department has chalked out a strategy to inform traders about GST implementation and to generate awareness about the laws and by-laws and other GST provisions. All the work on the transition would be performed on-line as per the GST provision. The DSC (Digital Singnature), Aadhar based e-sign, ARN(Applied Reference Number) are mandatory for all the businessmen. Besides, it is also mandatory to produce tax return of last six months for input tax credit at stock as per the provision of prevalent system. The enrolment process for migrating existing taxpayers to the proposed tax regime through GST common portal have already commenced through the GST Network, which provides the entire technological support to the GST.
  5. 5. Revision In a major realignment exercise for the Goods and Services Tax (GST) the Ministry of Finance has shifted 178 items from the top bracket of 28 percent to 18 percent, and introduced changes in GST returns filing to ease the both financial and compliance burden of taxpayers. The Council at its 23rd meeting in early November reduced the tax rate on over 200 items: As many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent. After these changes, only 50 items will attract GST rate of 28 per cent. Tax on two items was cut from 28 per cent to 12 per cent while on six items was reduced from 18 per cent to 5 per cent. On eight items, tax was reduced from 12 per cent to 5 per cent and on six items from 5 per cent to nil. Harmful goods like pan masala, aerated water and beverages, cigars and cigarettes, tobacco products; luxury goods like perfumes, ACs, dish washing machines, washing machines, refrigerators, vacuum cleaners, cars and two- wheelers, aircraft and yacht; and cement, paints are still in highest tax bracket. All restaurants will now be levied GST at 5 per cent, without input tax credit (ITC) benefits. However five-star restaurants within starred-hotels with room rent above Rs. 7,500 will attract 18 per cent and can still avail ITC benefits, while, outdoor catering will attract 18 per cent GST with ITC benefits. To ease compliance burden, the council relaxed the return filing criteria and also lowered the penalties for late filing.
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