Goods and services tax (GST)
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Revision as of 10:59, 29 June 2017
This is a collection of articles archived for the excellence of their content. |
Contents |
What is GST?
As on the launch date, 1 July 2017
[http://timesofindia.indiatimes.com/business/india-business/what-is-gst/articleshow/59364856.cms Prasad Sanyal | TIMESOFINDIA.COM | Jun 29, 2017
HIGHLIGHTS
GST is a multi-stage, destination-based tax that will be levied on every value addition
Final consumer will bear only the GST charged by the last dealer in the supply chain
Many VATs and levies currently in vogue will be subsumed by the new system come July 1
In what makes it significantly different from the existing system, GST is a destination-based taxIn what makes it significantly different from the existing system, GST is a destination-based tax
GST or Goods & Services Tax, set to launch on July 1, is a multi-stage, destination-based tax that will be levied on every value addition.
Set to revolutionise the way India does its taxes, GST will be levied on value additions at each stage of the production cycle - buying raw materials, processing, manufacturing, warehousing and sale to customers - the monetary worth added at each stage to achieve the final sale to the end customer will be taxed. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
In what makes it significantly different from the existing system, GST is a destination-based tax. Currently, the central government levies excise duty on the manufacture, and then the state adds VAT (Value Added tax) when the item is sold to the next stage in the cycle — i.e. from processed raw material like rubber to be manufactured into tyres. Then there would be a VAT at the next point of sale - i.e. when the tyre is sold to the dealership and then to the consumer and so on.
If the tyres are made in Tamil Nadu and used in Delhi, under the GST regime, Delhi will earn the revenue on the final sale, because it is a destination-based tax and this revenue will be collected at the final point of sale/destination. Tamil Nadu will however get the benefits of GST levied at the earliest stages of manufacturing since the tyre was made there.
One Nation, One Tax? Not Quite, Not Yet
GST would apply to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel and natural gas. It would apply to all services barring a few to be specified. With the increase of international trade in services, GST has become a global standard. GST will ensure that indirect tax rates and structures are common across India and increase the ease of doing business. This would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
The government has opted for four slabs for both goods and services — 5%, 12%, 18% and 28%. In addition, several items face zero levy, while bullion will attract 3% GST and luxury and sin goods that are in the top bracket will also attract a cess that will be used to compensate states for revenue loss.
The proposed tax system will take the form of "dual GST" which is concurrently levied by central and state government. This will comprise of:
Central GST (CGST) which will be levied by Centre
State GST (SGST) Which will be levied by State
Integrated GST (IGST) - which will be levied by Central Government on inter-State supply of goods and services.
Revenue secretary Hasmukh Adhia has said that the ultimate goal of the government should be to move to a single- or dual-rate goods and services tax regime.
"Ideally like all other advanced countries, we should have got one GST which is levied by one government only, and not a dual GST and also a GST in which there is a uniform rate. In our country, where there are different stratas of society to be looked after, it's not possible to have an ideal GST. We are in a good direction. We will prefer to have a single GST rate but after sometime. That should be the ultimate goal — instead of having too many complicated rates, at least one or two rates should be there," Adhia said
But pending that here's a graphic example of how the system as implemented from July 1 will work:
Many VATs and levies currently in vogue will be subsumed by the new system come July 1.
At the Central level, the following taxes are being subsumed:
1. Central Excise Duty,
2. Additional Excise Duty,
3. Service Tax,
4. Additional Customs Duty commonly known as Countervailing Duty, and
5. Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:
1. Subsuming of State Value Added Tax/Sales Tax,
2. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
3. Octroi and Entry tax,
4. Purchase Tax,
5. Luxury tax, and
6. Taxes on lottery, betting and gambling.
GST Rates list, as on 1 July 2017
GST Rates list: Here's your complete guide | TIMESOFINDIA.COM | Jun 28, 2017
The Goods and Services Tax (GST) has been finalised for almost all items by the GST Council led by Finance Minister Arun Jaitley. The council concluded its 16th meeting on June 11 where rates for 66 items were revised.+
Most of the goods and services have been listed under the four broad tax slabs- 5 per cent, 12 per cent, 18 per cent and 28 per cent. However, some items like gold and rough diamonds have exclusive tax rates. Also, some items have been exempted from taxation.
The new GST regime might well affect your personal budget with quite a few goods and services getting cheaper or dearer+ .
So, here is a list of all the goods and services and their respective tax slabs:
Tax exempted
Goods
A number of food items have been exempted from any of the tax slabs. Fresh meat, fish, chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, all kinds of salt, jaggery and hulled cereal grains have been kept out of the taxation system.
Bindi, sindoor, kajal, palmyra, human hair and bangles also do not attract any tax under GST.
Drawing or colouring books alongside stamps, judicial papers, printed books, newspapers also fall under this category.
Other items in the exempted list include jute and handloom, Bones and horn cores, hoof meal, horn meal, bone grist, bone meal, etc.
Services
Grandfathering service has been exempted under GST.
A low budget holiday may get cheaper as hotels and lodges with tariff below Rs 1,000 are in this category.
Rough precious and semi-precious stones will attract GST rate of 0.25 per cent.
5% tax
Goods
An array of food items such as fish fillet, packaged food items, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, cashew nut, cashew nut in shell, raisin, ice and snow will be priced at 5 per cent tax.
Apparel below Rs 1000 and footwear below Rs 500 are also in this category.
Some items in the fuel category like bio gas, kerosene and coal are in this slab.
Items from the health industry in this category include medicine, insulin and stent.
Other items in this slab are agarbatti (incense sticks), kites, postage or revenue stamps, stamp-post marks, first-day covers and lifeboats.
Services
Transport services like railways and air travel fall under this category.
Small restaurants will also be under the 5% category
Gold has been taxed under a separate slab of 3 per cent.
12% tax
Goods
Yet another category of edibles like frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen and ketchup & sauces will attract 12 per cent tax.
Cellphones will also be priced in this category.
Cutlery items like Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs fall in this slab.
Ayurvedic medicines and all diagnostic kits and reagents are taxed at 12 per cent.
Utility items like tooth powder, umbrella, sewing machine and spectacles and indoor game items like playing cards, chess board, carom board and other board games like ludo are in this slab
Apparel above Rs 1000 will attract 12 per cent tax.
Services
Non-AC hotels, business class air ticket, state-run lottery, fertilisers, work contracts will fall under 12 per cent GST tax slab
18% tax
Goods
Another set of consumables are listed under the 18 per cent category- biscuits, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasonings and mineral water.
Footwear costing more than Rs 500 are in this category.
Items like Printed circuits, camera, speakers and monitors, printers (other than multi function printers), electrical transformer, CCTV, optical fiber are priced at 18 per cent tax under GST.
Other items in this slab include bidi leaves, tissues, envelopes, sanitary napkins, note books, steel products, kajal pencil sticks, headgear and its parts, aluminium foil, weighing machinery (other than electric or electronic weighing machinery), bamboo furniture, swimming pools and padding pools.
Services
AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST.
28% tax
Goods
The residuary set of edibles which include chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, pan masala and aerated water fall in this category.
Bidi attracts 28 per cent tax.
An array of personal care items like deodorants, shaving creams, after shave, hair shampoo, dye and sunscreen are in the highest tax slab as well.
Paint, wallpaper and ceramic tiles are priced at 28 per cent.
Water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers and hair clippers have been clubbed together in this slab.
Automobiles, motorcycles and aircraft for personal use will attract 28 % tax - the highest under GST system.
Services
5-star hotels, race club betting, private lottery and movie tickets above Rs 100 are under the 28 per cent category.
As on 05 May, 2015
The constitutional amendment bill for rolling out the long-pending goods and services tax cleared the first hurdle with the legislation receiving LS approval.
What is GST?
It is a tax levied when a consumer buys goods or services. This is how what consumption is taxed in most developed countries.
What is article 246A and how will the power transfer to states take place?
The bill introduces a new article that says Parliament, and, subject to some conditions, the legislature of every state will have power to make laws with respect to goods and services tax imposed by the Union or the state.
Who will administer the levy?
The bill provides for a GST Council, a joint body of the states and the Centre.
There are fears that states may lose some revenue because of the introduction of GST. The bill allows for compensation for revenue loss to states for a period of 5 years.
GST will be levied on buyers of goods and services, or where the service is consumed. This means big consumer states such as Uttar Pradesh, West Bengal and Kerala will get a high share of the taxes. To compensate for this, manufacturing states such as Tamil Nadu, Maharashtra and Gujarat fear that they will lose out on revenues. The bill provides for 1 percentage point extra tax on goods for at least two years. This extra revenue will go to the state from which the goods originated, or where it was manufactured.
Analysis and definitions: In the view of economists
The Times of India, Dec 05 2015
GST a win-win for all in long run: Economists
What is the goods and services tax (GST)?
The proposed levy will be a single tax that will cover all indirect taxes at the Centre and state level, including entry tax. It is a value-added tax, which means a levy at each stage of production, sale or consumption will be set off against taxes paid in the previous stage.
Through a system of tax credits, those who are in the intermediate stages of a chain of production will get credits or refunds for whatever levies they have paid.This avoids cascading of taxes for the end-consumer. Unlike the existing VAT, which is levied only on manufactured goods, GST will also include services. Most economists agree that a GST is a win-win situation with the consumer, industry , government and economy all gaining in the long run.
When was GST conceived and when will it be implemented?
Although the plan has been discussed for years, a formal announcement was made in the 2006 Budget by P Chidambaram, the then finance minister. Since then, it has missed several deadlines. The last target date set for a nationwide roll-out of GST was April 2016, but even that is now extremely unlikely .
Why was it held up?
When the system was first discussed, there was great enthusiasm. But, gradually sta tes started raising objections.One reason is that finance ministers would lose control over the taxation system and be unable to give discretionary concessions. The other area of concern is potential loss of revenue from cash cows such as petroleum, which makes up for almost half the revenue for some states. There was also an element of bargaining in the states' objections.
What's the current status?
The Lok Sabha has approved a Bill to amend the Constitu tion so that the Centre can levy the tax. It has to be approved by the Rajya Sabha and then by state legislatures.
The NDA 's lack of maS jority in the Upper ho use means that it has to get the opposition on board.The Centre has assured states that it will compensate them for revenue loss due to GST roll-out, besides providing flexibility on entry tax and taxing oil products. Once Parliament passes the constitution amendment Bill, at least half the state legislatures will also have to do so for the Constitution to be amended. After this process is over, several other gaps need to be filled, including the rate of tax. A panel headed by chief economic adviser Arvind Subramanian has recommended standard GST rates of 17-18% and a revenue neutral rate in the 15-15.5% range.
What are the sticking points now?
The Congress says it sup ports the idea of a GST but wants several changes to the Constitution Amendment Bill introduced by the Modi government. In particular, it is focusing on three issues. The first is a demand to specify the GST rate in the Constitution Amendment Bill. The government argues that this will reduce flexibility as any change in the rate, say to deal with a natural calamity in a state, will require an amendment to the Constitution. One option is to specify a cap on the GST rate, another is to incorporate the rate in the other legislations to be enacted by the states and Centre. A second sticking point is the proposed additional levy of up to 1% by manufacturing states such as Gujarat, Maharashtra, Tamil Nadu and Karnataka to compensate them for losing out because the tax will be levied at the point of consumption instead of the point of production. The Subramanian panel has recommend that this levy be done away with.
This issued might be resolved by the Centre agreeing to compensate these states. The third point is the Congress also wants a panel of judges to deal with disputes instead of the proposal to let the GST Council decide. It is arguing that the complainant can't be the arbitrator too. Finance minister Arun Jaitley counters that by saying this will result in the legislature surrendering its powers to the judiciary.Some of the regional parties too are not in favour of letting a panel of retired judges to decide on the issue.
What is GST?
10 key points
The Times of India, August 4, 2016
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1. GST is a uniform indirect tax levied on goods and services across a country. Many developed nations tax manufacture, sale and consumption using a single, comprehensive tax.
2. Central Taxes GST would replace Central Excise Duty, Service Tax, Additional Duties of Excise & Customs, Special Additional Duty of Customs, and cesses and surcharges on supply of goods and services.
3. State Taxes GST would replace VAT, Central Sales Tax, Purchase Tax, Entry Tax, Entertainment Tax, taxes on advertisements, lotteries, betting and gambling, and state cesses and surcharges.
4. The main objectives of GST would be to eliminate excessive taxation. Central and state agencies often calculate taxes based not on the original cost of the product, but over and above the several layers of tax already levied on the product. This negatively affects the Gross Domestic Product of a nation.
GST is also expected to disincentivize tax evasion, lower tax rates, and make business operations easier.
5. The current NDA government and the Opposition disagree over the contents of the GST Bill
6. According to PRS Legislature Research, the 2011 Bill defined GST as any tax on the supply of goods or services, except taxes on the supply of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption.
7. The 2011 Bill provided for the creation of the Goods and Services Tax Dispute Settlement Authority to adjudicate disputes between the central government and state governments on the issues of GST resulting in any loss in revenue, and affecting the harmonized structure of the tax. The 2014 Bill deleted the provision of such an authority.
8. The 2014 Bill defined GST as any tax levied on the supply of goods, or services, except taxes on the supply of alcoholic liquor for human consumption.
9. In addition, the 2014 bill also deleted a provision of the 2011 bill that imposed restrictions on states on taxation of products deemed of special importance in inter-state trade or commerce.
10. It also removes a 2011 provision allowing states to tax the entry of goods into a local area that are for use or sale only to the extent levied by a Panchayat or a Municipality.
The GST’s rates
4-slab GST will spare common items in bid to curb inflation, Nov 04 2016 : The Times of India
Council Clears Cess On Coal, Sin & Luxury Goods
India's most ambitious tax reform since Independence took a giant leap forward in Nov 2016 with the Centre and states agreeing on the rates for the Goods and Services Tax (GST). To be implemented from April 1, 2017, the GST--which will subsume several taxes including excise duty and VAT--will have four rates. Currently, there are 15-20 tax slabs between the Centre and states. Coal, luxury and sin goods (eg cigarettes and alcohol) will attract cess in addition to the GST.
Finance minister Arun Jaitley said the GST Council had agreed to zero-rating for nearly half the items in the consumer price index (CPI) basket as well as major foodgrains, while goods of everyday use would attract 5% GST, as against 6% proposed earlier. In addition, there will be two standard rates of 12% and 18%, a move meant to blunt the Congress party's demand for a standard 18% levy .White goods and similar products will face 28% tax, instead of 26% suggested by the Centre earlier. The cess on luxury and sin goods, and the clean energy cess on coal, should help the Centre mop up around Rs 50,000 crore to compensate states for any revenue loss due to GST. There will be a sunset clause of five years, which will be reviewed on a year to year basis... Compensa tion through tax collec tions will have a cascading effect. There will not be any additional levy ,“ finance minister Arun Jaitley said, while explaining the rationale for the cess that has been questioned by many . While tobacco currently attracts 65% levy, the current rate on aerated drinks is around 40%.
The government suggested that the rate structure would be non-inflationary as rates on several items would come down. The finance minister said that the burden on the consumer would “hopefully“ be lower.
He said that instead of the current slab of 30-31% on products such as white goods, which includes excise duty of 12.5% and state VAT of 14.5%, the highest slab under GST will be 28%. The additional benefit of two percentage points that will accrue to the government is being used to reduce the lowest slab from the proposed 6% to 5%. In addition, some products such as soaps, oil and shaving sticks, which would have gone into the 28% bracket, will now move to the 18% slab.
The cess is something that has still not found acceptance.
“The ideology to come out with the rate structure is to avoid any negative impact on the CPI from inflation perspective. Hence the goods of mass consumption will have a lower tax incidence. While one can have some guesswork around the GST rate for some of the products, the devil is in the detail when the final classification list will be released which is the most challenging task for the policy makers.Still, imposition of cess is going to be an area of concern from the practical and admin istrative perspective,“ said Santosh Dalvi, indirect tax partner at consulting firm KPMG's India office.
Some also suggested a low rate for education and health.“Lower rate of 5% for items of mass consumption along with zero rated tax structure for essential commodities would make GST less regressive and pocket friendly for common man. Much to the joy of the consumer and industry , tax costs might even go down for commodities to be taxed at 5% provided the credits on procurements are fully allowed. While the lists are yet to be rolled out by the GST Council, all essential commodities and services, including education and health care should feature in the list of special concessional rate of 5% (if not zero rated),“ said BMR indirect tax leader Rajeev Dimri.
Tax rates, 2017
Effort To Ensure Tax Impact Is Not Inflationary
Setting the stage for rollout of goods and services tax (GST) from July, the Centre and states decided on rates for specific products which may lead to lower prices for a majority of products of mass consumption.
The idea is to ensure that the impact of GST is not inflationary . Rates on 1,211 items were finalised by the GST council with 81% facing a levy of up to 18%. “There is no increase (in burden) on any commo dity. On many commodities, there is a reduction in tax rates and tax-on-tax will also go away , lowering the burden,“ finance minister Arun Jaitley said.
“One criterion in mind is that the overall impact should not be inflationary ... We are banking on GST checking evasion and buoyancy in collection,“ Jaitley said. The GST council decided to lower tax inci dence on items such as sugar, tea, coffee and mithai as well as consumer durables but opted to retain the burden on cars. In addition, bikes with en gine capacity of over 350cc, which are seen as luxury goods, will see a new cess of 3%. Foodgrains have been exempted from GST, which will lower the burden on consumers since they currently face various levies that add up to around 5%.Revenue secretary Hasmukh Adhia said automobiles will attract 28% GST, with luxury vehicles facing an additional cess of 15%. Similarly , small petrol cars will face 1% cess, while diesel -powered small cars will attract 3% cess.
In certain cases, such as hair oil, soaps and toothpaste, tax incidence has been reduced from around 28% to 18%. For coal, the reduction will be from 11.69% to 5%, helping lower the cost of power. Similarly , the burden on those buying refrigerators or washing machines will come down from around 31 -32% to 28%, officers said. Instant tea and coffee are expected to be in a separate bracket although tea and coffee will be in the 5% slab.
“Items that are part of the consumer price index will see a huge reduction,“ Adhia said.
With detailed rates due to be released, businesses will now sit down and calculate product -wise impact and also plan for the rollout. Auto companies said the incidence will largely remain the same even after GST is rolled out.There were, however, concerns over items in the 28% slab.
“Consumer products like soaps, toothpaste and hair oil under 18% is good news and should see price drop for consumers. Similarly , several food items such as edible oil, tea, coffee sugar etc have been kept at 5%, with exemption for milk and foodgrains, which would also bring cheer to industry . The only concern is that 19% items (over 200) would be kept under 28%, which was initially meant for only few commodities such as luxury cars, aerated beverages etc,“ said Pratik Jain, partner at consulting firm PricewaterhouseCoopers.
There are certain issues which are expected to be thrashed out on Friday , when the Goods and Services Tax Council is also expected to finalise the rates for services.The council will decide on the levy for gold, biscuits, packaged and branded cereals, footwear, bidis and textiles.
Jaitley said the GST council had approved seven sets of rules, excluding those related to transition and returns, along with the forms. “It was quite surprising that the decisions were taken so quickly,“ Punjab finance minister Manpreet Badal said.
The tax reform will subsume central and state levies such as excise duty , additional duties of customs, service tax, value added tax, central sales tax, entry tax, octroi and luxury tax and is expected to clean up the messy indirect tax structure.
The Bill tabled in April 2017: aspects
Lubna Kably, Free lunch, other staff perks may trigger GST, Mar 29, 2017: The Times of India
An employer-employee relationship is no longer the sole purview of the HR department. Under GST, which is set to be introduced from July 1, the taxman could also be probing various facets of it.
GST would be payable if there is a supply of free goods or services to an employee exceeding the stipulated sum or if an employee avails of a company asset for personal use (say , a car). Also, input tax credit (taxes paid on procurements that can be set off against the tax liability) will not be available on supply of various facilities to employees, including life and health insurance.
TOI spoke to tax experts to decode these provisions contained in the GST Bills tabled in Parliament on Monday .
Supply made without consideration (to employees):
Supply of goods or services to a related party (a term that includes employees) without consideration, when made in the course of furtherance of business, is taxable under GST.
An exception has been carved out in the GST Bill.Schedule 1provides that “gifts“ not exceeding Rs 50,000 in value in a financial year to an employee shall not be treated as supply of goods and services. Amenities provided to an employee, which is not part of his or her cost to company (CTC) package, could now possibly attract a GST levy ,“ says Sachin Menon, indirect tax leader at KPMG India.While cost to company structures differ, typically , free lunch, car drops, scholarship to employee's children are not part of the CTC package, which leaves India Inc to grapple with GST complexities.
“The moot question is whether provision of a certain facility is a `supply of goods and services' or is it a provision of a benefit to employees arising out of an employment contractual obligation?“ asks Sunil Gabhawalla, CA and indirect tax expert. According to him, certain benefits that are made available to employees, like a shared car for dropping employees back home or even food provided in the cafeteria should be out of the purview of this provision and not subject to GST.
The term gift has not been defined in the GST bills. Going by its dictionary meaning, a gift is something voluntary supplied without any consideration. It does not stem from any contractual obligation. Seen in this light, given that the term `gift' has been used for carving out the monetary exemption, only items incidental to employment, like an award to an employee, or Diwali gifts should come under the GST levy, if these exceed the monetary limit per employee,“ says Uday Pimprikar, indirect tax partner, EY India.
“While employers could include various amenities as part of CTC, it would result in practical difficulties. For instance, if free food is included as part of CTC, would employees who bring their own lunch, seek compensation? The added problem is classification and application of the correct GST rates,“ adds Menon. relates to activities to be treated as supply of goods and services. Here, clause 4(b) provides that where goods held for the purpose of the business are put to any private use, whether or not for a consideration, such usage would result in a supply of services and a GST levy . “Going by the strict inter pretation, if a company provides a car to an employee for his use (both official and private) the usage could be considered as a supply of service to the employee, which is a taxable event for GST. In such acase, the company should be given the benefit of input tax credit and proper valuation norms must exist to ensure that GST is levied fairly and not on the fair market value, but rather the cost or depreciated value of such assets, says Pimprikar. “Based on past judicial decisions, it can be argued that levy of GST would apply only if it is the proprietor himself who has put a business asset to use for perso nal purposes,“ says Gabhawalla. It remains to be seen how the authorities will interpret this provision.
Denial of input tax credit: The final bill also includes a list of services for which input tax credit will not be available. Some of these are facilities extended to employees such as free or subsidised food and beverages at the workplace, sponsorship of club or fitness centres membership, cab facilities, group life and health insurance. The only silver lining is that input tax credit will not be denied in cases of services to be notified by the government, these will be those where the employer is obligated under any law to provide the same to its employees. Input tax credit will also not be available as regards the cost of travel benefit extended to employees on vacation. Currently , an input tax credit was not available for such employee related facilities, but India Inc was hoping for a seamless input tax credit mechanism under GST.
“GST has widened the definition of input goods or services to mean any goods or services used in the course of furtherance of business.Thus, in the absence of this restrictive clause, an employer could have set off the GST incurred on providing free lunch at the cafeteria, against his other GST liability . Perhaps, owing to this wide definition, the government has sought to deny the input tax credit in certain cases,“ says Pimprikar.
For now, India Inc is waiting to see which facilities get notified for which they could then claim an input tax credit. Input tax credit is the credit available for taxes paid on inputs (procurements) which can be set off against the tax liability .
Anti-profiteering clause
Govt To Use Provision In Rare Cases To Protect Consumers
The government plans to use the anti-profiteering clause under GST to focus largely on businesses that are prone to formation of price cartels -such as cement and steel -in addition to duopolies and monopolies to crack down on companies that do not pass on the benefit of lower prices to consumers.
Sources told that while prices across industries will be under watch, it was not possible for the government to keep tabs on all segments given the large number of goods and services. At the same time, it will take up cases that are flagged by consumers or other agencies but will largely confine itself to certain businesses. The anti-profiteering clause -which was criticised by states such as West Bengal -was built into the GST law to ensure that the price gains accruing due to an end of “tax on tax“, or cascading effect, are passed on to consumers. There was a spike in prices of several products in Malaysia after it rolled out GST, prompting the govern ment to insert the clause.
Bengal finance minister Amit Mitra was among the critics of the move, saying that it will result in a return to licence raj, although the government reassured industry that the provision will only be used in rare cases and was largely a deterrent against profiteering. Businesses are already conscious of the need to pass on benefits to the consumers.“In the past, we have noticed cartels in sectors such as cement and even the Competition Commission of India (CCI) has issued orders. If we notice such patterns, we are going to obviously crack down,“ said an official.
The law provides for an antiprofiteering agency , but the sources indicated that any of the existing agencies could be tasked with the job, which could include the CCI or even the consumer courts, although a final decision was yet to be taken.
In any case, the government does not expect to monitor prices for long and intends to use the anti-profiteering clause during the transition phase, sources said.
GST Council
The Hindu, November 4, 2016
Puja Mehra
GST Council pegs the GST rate structure at 5, 12, 18 and 28 per cent.
The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent. Ultra luxuries, demerit and sin goods, will attract a cess for a period of five years on top of the 28 per cent GST.
Overcoming opposition from some States, the GST Council finalised on Thursday a multiple-slab rate structure, including the cess, for the new indirect tax. The quantum of cess on each of these will depend on the current incidence of tax.
On nearly half of the consumer inflation basket, including food grains, the GST will be at 0 per cent, Council Chairman and Union Finance Minister Arun Jaitley told a media conference after the meeting.
The approved slabs vary slightly from the proposal the Centre had moved at the Council’s last meeting.
The lowest slab of 5 per cent will be for items of common consumption, Mr. Jaitley said.
There would be two standard rates of 12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods.
Most services are expected to become costlier as the ones being taxed currently at the rate of 15 per cent are likely to be put in the 18-per cent slab, said Revenue Secretary Hasmukh Adhia. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs, Mr. Adhia added.
The highest slab of 28 per cent will include white goods and all those items on which the current rate of incidence varies from 30-31 per cent.
The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it.
Mr. Jaitley said the Council will review annually the tax revenue raised from the cess that will fund compensations from the Centre to States for losses arising out of the transition to the GST.
The Centre gave a constitutional guarantee to States for making good these losses for a period of five years.
“If the revenue raised from the cess is found to be in excess of the sums needed to finance the compensations to States, the Council will decide to what use the surpluses will be put,” Mr. Jaitley said.
The GST will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess. Only the Clean Environment Cess is being retained, revenues from which will also fund the compensations.
Though on the expiry of the five-year period the cess will no longer be collected, the Council will, Mr. Jaitley said, revisit the GST rates on ultra luxury and demerit goods.
The Council did not take a call on the GST rate on gold. “GST rate on gold will be finalised after the fitting to the approved rates structure of all items is completed and there is some idea of revenue projections,” Mr. Jaitley said.
Benefits
How almost everybody gains
The Times of India, Aug 4, 2016
After decades of tying itself up in political knots debating a transparent, simple, efficient, one-nation system, India will soon be on a clutter-free tax highway. Around 6 million entities are expected to be covered under GST+ and more than 10 tax rates are likely to fall. Here's a quick look at how GST will impact the economy, businesses and the consumer.
ECONOMY
- Dual monitoring by the Centre & states to reduce tax evasion
- Better compliance through real time matching of supplier & purchaser
- Reduction in approximately Rs 1.8 lakh crore annual loss due to excise duty exemptions
- Cut in Rs 1.5 lakh crore estimated loss to states due to tax exemptions
COMPANIES
- Tax credits to lower tax burden, improve profit margin for some
- No distinction between product and service for tax
- Uniform tax across the country to ease business
- Smooth movement of products across states
- One-time increase in compliance cost likely
CONSUMER
- No tax rates have yet been decided though a suggestion of 3 rates-12%,
- 17-18% and 40% has been made
- Most products are likely to be less expensive over time
- Most services (eg. restaurants, travel, mobile bills, insurance premium) likely to cost more
- Mobiles, jewellery, some readymade wear in some states may cost more
