A very significant day has finally arrived in the economic corridors that will decide the fate of inflation in India. Today, the new tax rates will be decided under GST for the goods and services running across the nation. The meeting will be held in Srinagar by the apex GST council headed by union finance minister Arun Jaitley. A minister from the meeting mentioned about the intensity of the meeting as, “There is a lot of brainstorming to ensure that mass consumption products do not get expensive.”
The two days long meeting of GST council will receive equal participation from 29 states and union territories along with the revenue department while all will be headed by the senior officials of GST council and Arun Jaitley. There has been continuous series working upon the ambitious GST bill from last 2 months to sort out all the tax rates and to classify them accordingly.
Finally, the prepared list of tax rates will be discussed at the meeting for approval. MS Mani, senior director for indirect taxes at consulting firm Deloitte Haskins & Sells detailed some points and significance of the meeting as, “The possibility of lower rates or certain products in each category cannot be ruled out considering the fact that these may be consumed by the weaker section of society. This will, however, increase the complexities in the GST regime. It is, therefore, essential to keep such exceptions to the minimum and have lower rates for certain products in a category only when it is absolutely essential.”
It was predetermined that a four slab rate structure will be levied over the wide range of goods and services commencing from 5, 12, 18 till 28 percent. Although a special provision is also suggested for sin goods to levy 40 percent on them with a capping. The automobile sector is also eyeing upon the situation as Maruti Suzuki CFO Ajay Seth himself quoted that, “It depends on the classification of the goods and several other factors. We enter into annual negotiations with vendors on rates, based on an index, Whatever benefit will accrue will be passed on but we are still quantifying it. There is a possibility that the cash flow requirement for dealers will go up because of the new regime. All this will need to be factored in.”
There will be compensation for the states in cases of revenue losses by abolishing of the state taxes like VAT and center will recover this amount from the extra sourcing of Cess through demerit goods for the first five years as a trial.
Read Also: Disadvantages of Transaction with Unregistered Dealer in GST
As of now, the GST council has decided a Cess on the luxury goods starting from 12 percent on luxury cars, 15 percent and all the way goes up to 135 percent and 290 percent. Although the fitment committee is trying to mold the tax rates as close to the currently prevailing tax rates in order to make a neutral scenario for both the inflation and impact on state governments.
Items like gold will be discussed thoroughly and are supposed to be excluded from the four-tier slab rate structure. The services are more likely to be fitted into 12 and 18 percent rate structure which is guided towards the consumers who are paying 15 percent on service currently.
But the original series has been directing that a tax rate of 18 percent is in the discussion which will make the services expensive in the GST regime while service rate of 12 percent is suggested for everyday services. Some of the goods are believed to be exempted from the taxes like agricultural implements, foodgrains, sugar, salt, fresh vegetables etc. The leading head of the base sector Mother Dairy Fruit & Vegetable CFO Meghnad Mitra said that “We will change the payment terms and deduct the amount from the bill if the tax is not paid because I do not want my company to lose out on input credit.” Final rates are expected to be out in week’s time but the committee will brainstorm today and tomorrow for a better judgment.
