Friday, June 30, 2017

GST -- what it means for consumers

Tonight India ushers in a landmark reform in indirect tax regime by rolling out the GST (Goods and Services Tax).

In fact, the whole process of reforming our tax structure had begun many many years ago; and whenever any government moved forward in this direction, all political parties "played politics". And today, we have politics in full action, many opposition parties are boycotting the special parliament session.

My understanding is that in the long run GST is going to do good for our economy: one, evading taxes will become more difficult; two, taxes won't be a taxing thing. There are many more advantages that GST will ring in. At the same time, any initiative is bound to have its flipside. I feel it's our call to see and leverage the positives, rather than harp on the negatives.

For a vast country like India with multiple laws governing goods and services in different states, this transition to a common tax regimen, isn't by any means going to be easy. But I am sure we will get used to this in a few months, if not earlier.

Here below is a very easy-to-understand table compiled by KPMG, which explains how GST will impact us, consumers, in terms of prices.



SOME QUICK FACTS ON GST (COMPILED BY KPMG)

Tax %
Goods
Services
No tax – 0%
  • Jute, fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, Cereal grains hulled, Palmyra jaggery, flour, besan, bread, prasad, salt – all types
  • Bindi, sindoor, bangles, kajal, handlooms
  • Stamps, judicial papers, printed books, newspapers,
  • Bones and horn cores, bone grist, bone meal, hoof meal, horn meal
  • Children's' picture, drawing or colouring books, human hair
  • Hotels and lodges with tariff below Rs 1,000, Grandfathering service has been exempted under GST.
  • Rough precious and semi-precious stones will attract GST rate of 0.25 per cent

5%
  • Fish fillet, 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
  • Apparel below Rs 1,000, packaged food items, footwear below Rs 500,
  • Medicines, stent, Insulin, lifeboats
  • Kerosene, coal, bio gas, agarbatti, kites
  • Postage or revenue stamps, stamp-post marks, first-day covers
  • Transport services (Railways, air transport) - because their main input is petroleum, which is outside GST ambit
  • Small restaurants


12%
  • Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, bhujia, namkeen, ketchup & sauces,
  • Ayurvedic medicines
  • Tooth powder, agarbatti
  • Colouring books, picture books, exercise books and note books umbrella, sewing machine, cellphones
  • All diagnostic kits and reagents, Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs
  • State-run lotteries
  • Non-AC hotels, business class air ticket
  • Fertilizers
  • Work Contracts
                          
18%
  • Footwear costing more than Rs 500
  • Bidi Patta
  • Biscuits (All catogories), 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
  • Kajal pencil sticks
  • Headgear
  • AC hotels that serve liquor
  • Telecom and IT services
  • Branded garments
  • Financial services
  • Room tariffs between Rs 2,500 and Rs 7,500
  • Restaurants inside five-star hotels

28%
  • Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala
  • Aerated water
  • Paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen
  • Wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine
  • ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use
  • Private-run lotteries authorised by the states
  • Hotels with room tariffs above Rs 7,500
  • 5-star hotels
  • Race club betting
  • Cinema
Key Facts about GST
  • 81% items to be taxed below 18% tax slabs
  • The GST would be applicable on the supply of goods or services as against the present concept of tax on the manufacture or sale of goods or provision of services
  • The GST would apply to all goods other than alcoholic liquor for human consumption and five petroleum products, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel
At the Central level, the following taxes are being subsumed:
  • Central Excise Duty,
  • Additional Excise Duty,
  • Service Tax,
  • Additional Customs Duty commonly known as Countervailing Duty, and
  • Special Additional Duty of Customs
At the State level, the following taxes are being subsumed:
  • Subsuming of State Value Added Tax/Sales Tax
  • Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States)
  • Octroi and Entry tax
  • Purchase Tax
  • Luxury tax, and
  • Taxes on lottery, betting and gambling



FACTOIDS – WHAT’S UP, WHAT’S DOWN (COMPILED BY KPMG)

Sector
What’s got costlier
What’s got cheaper
What saw no change
AUTOMOBILES
28% GST + CESS

  • Small cars
  • Luxury cars/SUVs
  • 2 Wheelers
  • Mid size cars
HOME APPLIANCES
GST: 28%

  • ACs, TVs & Washing machines


TRAVEL  SERVICES

  • AC Train Travel
  • Business Class Airfare
  • Economy airfare
  • Uber/Ila
  • Metro/Suburban rides

GOLD JEWELLERY
GST: 3%

  • Gold - Opens window for cheap jewellery imports from Indonesia & South Korea


TELECOM & CONSUMER TECHNOLOGY
  • Mobile Phones
  • Wi-fi services
  • Telecom services


SERVICES
  • Life Insurance premiums
  • Banking services
  • Investment management services
  • Online bookings
  • Business Class airfare
  • DTH services
  • Courier services
  • Wi-fi services

  • Watching movies
  • Ola, Uber services
  • Metro travel
  • Suburban train travel
  • Economy airfare
  • Religious travel


WHAT GST MEANS FOR YOU
WHAT’S COSTLIER?

  • Small cars
  • Tea/coffee/masalas
  • Shampoos/Deos
  • Gambling/betting
  • Metals/cement
  • Aerated drinks
  • Tobacco
  • Courier services
  • Insurance premiums
  • Banking charges

WHO GETS TAXED WHAT?

  • GST has 4 basic tax rates
  • 5%, 12%, 18% & 28%
  • Basic staples (foodgrain, milk, veg) are tax exempt
  • No tax on services like education & health

GST: WHAT’S THE CHANGE?

  • Pre-GST: 17+ state and central taxes on goods and services
  • GST: Single tax with 4 basic rates
  • Pre-GST: Multiple taxes at different rates
  • GST: Single tax at point of consumption

The GST CLUB and ANALYSIS across countries/continents
THE GST CLUB

  • 160 countries have GST
  • India’s rate among the highest (28% the top slab)
  • Scandinavian countries have highest single rate of 25%
  • Uruguay & Argentina follow with 22% and 21%


GST COMPARISON

  • Global VAT/GST rates:
  • South East Asia: 7%
  • Asia:       12.8%
  • Europe & CIS: 19.8%
  • Africa: 16.8%
  • Latin America: 15.7%




1 comment:

  1. Thanks for the excellent details on GST in India. I am not an expert. So bear with me if I say something incorrectly. To me, this looks like the same old Excise Tax and Service Tax with a new attractive name.

    ReplyDelete