The Goods and Services Council after finalizing the GST Rate in India of 1,211 items with majority of items keeping at under 18%, has grabbed the attention of many. The Council gave its approval to 7 rules while on the other hand the legal committee is taking care of the remaining 2 rules. If we talk amore about the same, the meeting was mainly focused on the fitment of goods under the slabs. However, clearing the air over the Goods and Services rates, the officials said that almost 81% of the items will fall under below 18% slabs and only the 19% of the goods will be taxed above 18%.
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- Sugar, Tea, Coffee, and Edible Oil will fall under the 5% slab. While on the other hand cereals, milk will be exempted from the list.
- Well, in a big boot to industry, the Council has set the rates of industries intermediate items and capital goods at 18%.
- Moreover, coal to be taxed at 5% against the current rate of 11.69%.
- Tooth Paste, Hair Oil, Soap will come under 18% tax bracket, which is current being taxed at 28%.
- Talking about common man, majority of the items have gone into 12% and 18% slabs.
- The Indian sweets and mithai will fall in 5% slab.
However, one thing that needs to be mentioned here is the fact that as many items in the list will attract 0%, thus many states have pitched for keeping items sensitive to their state out of the list. For example- Uttar Pradesh wants that the puja material should be out of the tax net. Similarly, other states want silk yarn and cotton yarn to be out of the list too. Furthermore, the main endeavor of the centre is to keep the list as small as possible because large list of exemptions would hurt the objective of the base expansion. Not only this, the Council also had a discussion on exemptions and items falling in 5% bracket like processed food of daily needs. And, on the other hand, all raw food items such as foodgrains will be exempted.
Moreover, for your reference, here is a primer…
What is good about the new tax regime?
Let’s just start from the beginning. If we talk about the current system, a single product is taxed multiple times and that too at different rates. For instance, every day, more than 20,000 truck drivers have to wait in the long queues up to 3 kilometers in order to pay an entry fee at the checkpoints located of Delhi with tempers fraying, food rotting and costs rising.
Thus, if we talk about GST tax rate list, it will apply to the goods at the time of consumption rather than where these goods are produced. And, this move will further reduce the cascading effect of taxes, hence allowing the producers to claim their credits easily while minimizing the corruption opportunity.
What gets taxed and at what rate?
There are four basic tax slabs of 5%, 12%, 18% and 28%. In fact, 50% of the items in the retail inflation basket won’t be taxed so as to protect the consumers from the price rise of the daily need items. However, tobacco products and luxury goods will attract the higher rates.
Will the tax impact the economy?
If experts are to be believed, countries like Canada, Australia, New Zealand have already witnessed a-one time bump in the inflation after GST came into the effect, but the prices were soon normalized. If we look at the wider side of the economy, according to experts Goods and Services could lift the growth by as much as 2%. However, the greater tax compliance and efficiency has the potential to increase the revenue of the Government. Not only this, by streamlining the process of buying and selling the stuff, the Government has also ensuring to boost Make in India initiative.
Do Other Countries Use this Type of Tax?
With the rollout of GST from July 1, India will also join the bandwagon of 160 nations, having value-added tax. However, GST rate in India is going to be among highest if we compare other countries. Moreover, with 29 states, 22 official languages and 9 million businesses, there is no denying the fact that the logistics of overhauling of India’s tax system are likely to make any tax changes.