The GST Council finalised tax rates for services under the Goods and Service Tax (GST) regime, scheduled to kick-in from July 1.Travelling on metro, local train, religious travel, Haj yatra will all be exempt from GST. Mobile operators lobby, COAI expressed displeasure at 18% tax imposed on telecom services. Movie-going to get cheaper with 28% tax on cinema halls. GST is likely to be non-inflationary as the government has kept a majority of food items, which form 50% of the consumer price index, out of the tax net. E-commerce players to deduct tax at source before paying suppliers. AC restaurants and those with liquor licence to charge 18% GST, while 5-star hotels will levy 28%; hotels with tariff of Rs. 1,000-2,500 to pay 12% rate. Restaurants with turnover of Rs. 50 lakh or below to face 5% tax under GST and non-AC restaurant at 12%, Transport services will attract 5% GST. Live animals, fruit juices and meat will call for a 12% tax along with butter and cheese, condensed milk under 18%. Coffee (not instant), tea and groundnut and fish will attract 5% under GST. The tax rate on gold has not been finalised yet and the Council will meet again on June 3.
Four different rate slabs for services are five per cent, 12 per cent, standard rate of 18 per cent and luxury rate of 28 per cent, out of which five per cent mostly comprises transport services. The Council decided the tax rate on 1,211 goods, keeping most food items out of the purview of GST. Bindi, vermilion, glass bangles, handlooms, hearing aids and handmade musical instruments have also been exempt under GST. A total of 7% of items have been kept zero rated. While jaggery is exempt under GST, cane sugar and beet sugar are in the 5% tax slab. Bio gas plant, wind mills and kerosene lantern and coal will also be under the 5% tax rate.
Mobile phones, fountain pen ink, tooth powder, incense sticks, feeding bottles, Braille paper, children’s colouring books, umbrellas, pencil sharpeners, tractors, bicycles, contact lenses, spectacle lenses, utensils, sports goods, fishing rods, combs, pencils and hand paintings have been placed under the 12% tax rate under GST. The goods which will fall under 18% tax rate include helmets, LPG stoves, nuclear reactors, clocks, military weapons, electronic toys and plastic buttons. The items which have been put in the highest tax slab of 28% include aerated drinks, perfumes, after-shave lotions, deodorants, clothing of furskin, razor blades, cars, revolvers, pistols. More than 200 products appear in the 28% tax slab.
The GST rates on telecom, financial services have been fixed at 18%, while healthcare and education have been exempted from service tax on the second day of the GST Council meet in Srinagar. The fitment of rates has brought good news for the middle class as essential commodities have been placed in the lowest tax bracket, while foodgrains have been completely exempted. This means the prices of commodities such as rice, dal, sugar, will go down from July 1 when the GST comes into effect. However, those who were planning to buy a new car could be forced pay more after July 1 as most vehicles fall in the higher tax basket.
Milk and curd will continue to be exempt from taxation once the GST is effective. Sweets will attract 5 per cent tax under the GST. Daily-use items like sugar, tea, coffee (barring instant coffee) and edible oil will attract the lowest tax rate of 5 per cent, almost the same as under the current tax structure. Cereals will be in exempt list. Prices of food grains, especially wheat and rice, will come down as they will be exempt from the GST. Currently, some states levy VAT on them. Food grains and common-use products like hair oil, soaps, toothpaste and also electricity will cost less from July 1. These items at present attract 22-24 per cent tax through a combination of central and state government levies.
The GST tax on coal has been brought down to 5 per cent from the current tax incidence of 11.69 per cent, thereby making electricity generation cheaper. Besides, a clean energy cess will be levied on coal, lignite and peat production at the rate of Rs. 400 per tonne. Large cars with engine greater than 1500 cc and SUVs with length more than 4m and engine greater than 1500 cc will attract cess of 15 per cent. Motorcycles with engine of more than 350 cc will attract 3 per cent cess and an equal amount of levy will be applied to aircrafts for personal use and yachts.
Filter and non-filter cigarettes not exceeding 65 mm will attract cess of 5 per cent plus Rs. 1,591 per 1000 sticks. For cigars, a hefty levy of 21 per cent or Rs. 4,170 per 1000 sticks, whichever is higher, would be levied. Branded gutkha will be slapped with a cess of 72 per cent, while smoking mixtures for pipes and cigarettes will attract a levy 290 per cent.
In many countries, taxes are collected at the service point (of sale). For example in Canada, even when you buy stamp from a post office, 13% tax from buyer is charged. The tax is uniform for all items of purchase – liquor, grocery, fancy items, travel tickets of tram, bus and train, etc. The collected revenue is directly taken by government. Tax evasion is not known yet. May be the economic position of the tax-payers of India and Canada varies; People here in India are not paid at par with their counterparts in Canada. So, the different rates of taxes are inevitable?
The blanket tax system is expected to be rolled out from July 1. However, some company leaders believe that a July implementation seems unrealistic with most of the small and medium businesses still not registered on the GST Network. Tax experts said while food items may become cheaper, prices of a large number of products could go up. The broad rate structure of GST has become clear with very few items being exempted, most of them being in the 18 per cent category and a large chunk under the 28 per cent category. Accordingly, while food stuff and unprocessed basic items like tea, coffee and edible oil may become cheaper; a large number of items which will be under 28 per cent bracket would become costlier.
I hope, people will enjoy ‘achche din’ with the taxes that they have to pay on everything.
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