GENERAL AWARENESS – AUGUST 2017 21
Finally, the GST cat is out of the taxman’s bag! With the
GST council finalizing the GST tax rates, the much-
awaited decision is now in the public domain. But before
we delve deep into it, it would be advisable to grasp the
background scenario against the latest development.
We basically pay two broad kinds of taxes: those which
are part of the price of an item we buy – indirect taxes
(like sales tax, VAT etc) we pay through the seller to the
government and those which depend on the level of
personal income, wealth or assets – the direct taxes
(income tax, corporate tax etc.).
The Indian consumers pay multiple indirect taxes while
buying different goods and services, which are included
within their selling prices. The list is a long one – on
buying goods, we pay excise duty, sales tax, VAT and on
services, the service tax. By the time an item reaches our
hands, it has been through multiple stages of taxation,
which causes a substantial padding up of its cost.
Resultantly, the tax burden on the final consumer comes
out to be a tad too high.
It is with this goal of easing the consumer burden and
simplifying the tax structure that a single, all-inclusive
indirect tax was mooted in the 2006 Union Budget. After
much wrangling, debate and parliamentary roadblocks in
its way, the GST bill was finally enacted into a law only
recently. With all the requisite infrastructure in place
now, the GST regime is all set for its initial rollout on July
1 this year.
A 4-tier GST tax structure has been proposed by the GST
Council. The proposed GST rates are likely to ease the
burden on the common man due to the lower rates on
most mass consumption items. Keeping zero/very low
rates for essential food items, which make up half of the
consumption basket, will ensure zero inflationary
pressures due to the GST. Most FMCG items including hair
oil, toothpaste and soap will be taxed @ 18% as
compared to the earlier 28%. Beverages like tea and
coffee will be taxed at 5% while staples like milk, pulses
and food grains are exempt from GST.
Simultaneously, luxury goods and negative items would
be taxed at a higher rate to ensure revenue neutrality for
the government under the new system. An additional
concessional GST tax slab is likely for gold and other
precious metals that currently attract only 1% VAT.
New Tax Slabs for Some Goods and Services
No Tax Slab
Goods: No tax will be imposed on items like fresh meat,
fish chicken, eggs, milk, butter milk, curd, natural honey,
fresh fruits and vegetables, food grains, besan, bread,
prasad, salt, bindi. Sindoor, stamps, judicial papers,
printed books, newspapers, bangles, handloom, etc.
Services: Hotels and lodges with tariff below Rs 1,000,
Grandfathering service has been exempted under GST.
5% Slab
Goods: Items such as fish fillet, cream, skimmed milk
powder, branded paneer, frozen vegetables, coffee, tea,
spices, pizza bread, rusk, sabudana, kerosene, coal,
medicines, stent, lifeboats will attract tax of 5 %,
Services: Transport services (Railways, air transport),
small restraurants will be under the 5% category
because their main input is petroleum, which is outside
GST ambit.
12% Slab
Goods: Frozen meat products , butter, cheese, ghee, dry
fruits in packaged form, animal fat, sausage, fruit juices,
Bhutia, namkeen, Ayurvedic medicines, tooth powder,
agarbatti, colouring books, picture books, umbrella,
sewing machine, cellphones will be under 12 % tax slab.
Services: Non-AC hotels, business class air ticket,
fertilisers, Work Contracts will fall under 12 per cent
GST tax slab
18% Slab
Goods: Most items are under this tax slab which
includes 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.
Services: AC hotels that serve liquor, telecom services,
IT services, branded garments and financial services will
attract 18 per cent tax under GST.