India has finalised the tax rates on all but six out of the 1,211 items in the proposed GST (Goods and Services Tax) regime, fitting over 80% of the items in the up to 18% tax slabs, effectively making food grains cheaper, while exempting essential items such as cereals and milk from the levy altogether.
Revenue Secretary Hasmukh Adhia, who is in Srinagar for a meeting of the GST Council, said that only 19% of all goods will be taxed at the highest slab of 28%.
The council has put items of essential use such as sugar, tea and edible oil at the lower end of the tax slabs at 5%. Another item which will attract the 5% levy is coal. On the other hand, toothpaste and hair oil, which at present attract a tax rate of 28%, are fitted in the 18% slab, effectively making your daily needs bill slimmer. Capital goods and industrial intermediate items will also be taxed at 18% under GST.
Adhia said that 7% of the items are at the 0% tax slab, while 14% are in the 5% slab. The 18% tax slab has the highest number of the items at 43% of all, whereas 17% of items will fall under the 12% tax slab.
Earlier March, the Lok Sabha passed four GST bills, including one bill for implementation of GST at the Centre, one for States, one for Union Territories, and one for inter-state movements. It may be noted the move to GST is the most ambitious tax reform India has ever taken. It seeks to replace multiple taxes and levies with a single nation-wide value-added tax, to be charged at the point of consumption.
Businessmen, tax experts, economists and others have endlessly hailed the proposed shift to the new tax regime, saying that it will dramatically improve the ease of doing business in India, will significantly reduce tax evasion, and will eventually add to the GDP growth. However, some have also pointed out the demerits in having four different tax slabs, and the expected difficulties in implementation of this massive tax overhaul.
Finance Minister Arun Jaitley has said that GST will ensure free movement of goods across the country, and will put an end to the tax differences. It may be noted that while the GST looks like a done deal, with it set to be implemented from July 1, the basis of the jurisdiction between centre and states is still to be worked out.
The government has proposed two standard rates of 12% and 18% under the GST regime, and has provided for cess for five years to fund the compensation for the states’ loss in revenue. Further, a lower tax rate of 5% has been provided for essential items, and a higher tax rate of 28% has been provided for luxury goods. Arun Jaitley has said that the cess would be levied on sin goods and luxury goods, and will be used to fund compensation to states for their losses.
The government had achieved a major breakthrough in its quest to bring GST with an agreement on dual control of tax assessees thrashed out between the Centre and the states. Previously, thanks to some tough bargaining by the states, especially after the political standoff on demonetisation, GST was threatening to become a non-starter. But the thorny issue of dual control was resolved in principle with the assessees above Rs 1.5 crore turnover shared 50:50 by the Centre and the states, and those below Rs 1.5 crore turnover shared 90:10 in favour of the states.
The deadline to implement the GST was also moved further to July 1, which was seen as positive for the industry as it will give more time to prepare for the roll out and greater clarity.