Goods and Services Tax (GST): A Plethora of Taxes & Sub-taxes


(Updated on 12.07.17) As per the GST Council decision on Thursday, Dairy Products and certain commodities will not attract any tax under the new Indirect tax regime. The GST Council have given the businesses a period of 40 days to brace themselves with full clarity on different tax rates before the July roll out of GST.

ICICI Bank authorized by finance ministry to collect GST

ICICI Bank, India’s largest private sector bank by consolidated assets, today announced that it has been authorized by the Ministry of Finance to collect Goods and Service Tax (GST). This service will help business entities including proprietorship firms. (Sources: Times Of India)

According to the detailed list of tax rates released by the federal indirect tax body, dairy products such as milk and natural honey will not be taxed whlist products like cellphones will bear 12% tax and cigarettes and cars will be levived the highest tax rate of 28% along with cess under the new goods and services tax (GST) regime.

To eliminate entry barriers and to create a single national market, the new unified indirect tax system divides all goods into different tax slabs such as 5%, 12%, 18%, and 28% along with additional cess.

“The Council has broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods… it will be subject to further vetting during which the list may undergo some changes,” said the chapter-wise GST schedule for goods uploaded on the website of the Central Board of Excise and Customs (CBEC).

The GST Council will take final decision in accomodating various services in either of the 12% or 18% rate on Friday. It will also determine the taxation of few items such as biris, gold jewellery and footwear which are quite relevance to some states.

Essential food items like eggs, dairy produce, meat and most fish varieties (not the frozen one) will attract any tax. Frozen or processed fish will bear 5% tax, frozen meat will carry 12% tax. Butter will be taxed at 12%, while 18% tax will be levied on condensed milk. Watches of different specifications have been kept under 18% and 28% tax slabs. Medical instruments will bear a tax of 5% to 28% depending on the classification and mass use nature. Contact lenses will attract a 12% tax.

The CBEC has also provided the list of commodities falling under the highest tax slab of 28% which will attract additional Cess, such as (Sugar and sugar confectionery), (Cocoa and cocoa preparations), (Preparations of cereals, flour, starch or milk; pastry cooks’ products), (Beverages, spirit and vinegar), (Tobacco and manufactured tobacco substitutes), (Salt; sulphur; earths and stone; plastering materials, lime and cement), and so on and so forth.

Items like Pan Masala will attract a 60% cess, aerated water and lemonade a will bear 12% cess and unmanufactured tobacco 71% cess.

Cigarettes will attract 5% cess and a specific duty ranging from Rs1,591 to Rs2,876 per thousand sticks depending on their length and on whether a filter is attached.”

Large cars, 4 metres long sports utility vehicles and have an engine capacity of more than 1,500 cc, mid-segment hybrid cars with engine capacity less than 1,500 cc will bear a 15% cess over and above the 28% GST rate.

Small petrol cars up to 1,200 cc and diesel cars up to 1,500 cc, it will attract 1% cess. Aircraft and yachts for personal use and for pleasure or sports will bear a 3% cess.

For further information on Different tax slabs on all goods and services, kindly click here

Goods and Services Tax

Indian Government is anxious on implementing GST- the biggest indirect tax reforms in India, proposed to be effected from 01 April 2017. The foremost idea of GST is to streamline all the different types of indirect taxes and implement a “single taxation” system.

What is Goods & Services Tax (GST)?

GST is a ‘destination-based tax on consumption’ of goods and services. It will be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a condensed manner, only value-added goods and services will be taxed and the burden of tax is to be borne by the final consumer.

What exactly is the concept of destination-based tax on consumption?

The tax would be accumulated by the taxing authority which has jurisdiction over the place of consumption which is also termed as a place of supply. That is, GST paid on the procurement of goods and services can be set off or redeemed against the payable taxes on the supply of goods or services. Through tax credit mechanism the manufacturer or the wholesaler or the retailer can claim back the applicable GST.

In general term, GST can be defined as a consumption based tax. GST is applied on goods and services at the place where final/actual consumption happens.

What are the existing taxes that will be subsumed under GST?

The following taxes will come under the regime of GST:

a) Taxes currently levied and collected by the Centre:

  • Central Excise duty, Duties of Excise (Medicinal and Toilet Preparations),

  • Additional Duties of Excise (Goods of Special Importance), Additional Duties of Excise (Textiles and Textile Products),

  • Additional Duties of Customs (commonly known as CVD),

  • Special Additional Duty of Customs (SAD),

  • Service Tax, Central Surcharges and Cesses so far as they relate to supply of goods and services.

b) Taxes currently levied and collected by the states:

  • State VAT, Central Sales Tax,

  • Luxury Tax, Entry Tax (all forms),

  • Entertainment and Amusement Tax (except when levied by the local bodies),

  • Taxes on advertisements eg. Purchase Tax,

  • Taxes on lotteries, betting and gambling,

  • State Surcharges and Cesses so far as they relate to supply of goods and services.

Being a federal country, both the Centre and the States have the powers to levy and collect taxes through appropriate legislation. Indian Government is going to follow Dual System GST, with the Centre and States simultaneously levying taxes on a common tax base. The two components of Dual System GST are known as Central Goods and Service Tax (CGST) and State Goods and Service Tax (SCGT).

Goods and Service Tax will be levied on the place of consumption of Goods and services such as:

  • Intra-state supply and consumption of goods & services.

  • Inter-state movement of goods.

  • Import of Goods & Services.

Which are the commodities proposed to be kept outside the supervision of GST?

The commodities kept outside the supervision of GST are Alcohol for human consumption, Petroleum Products viz. petroleum crude, motor spirit (petrol), high-speed diesel, natural gas and aviation turbine fuel & Electricity. The existing taxation system (VAT & Central Excise) will be levied on the above commodities.

What will be the status of Tobacco and Tobacco products under the GST regime?

Tobacco and tobacco products would come under the GST regime. In addition, the Centre would have the right levy Central Excise duty on these products.

What are the benefits of GST?

  • The entire Indian market will be a unified market under one taxation system.

  • It will facilitate seamless movement of goods across states and reduce the transaction costs of businesses.

  • The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits.

  • It will encourage more transparency in the taxation process.

  • All sector will come under the tax regime.

  • The tax structure will be the simplest one.

  • The biggest gain would be in terms of a reduction in the overall tax burden on goods.

  • The introduction of GST would also make our products competitive in the domestic and international markets.

The Goods and Services Tax (GST) Council decided upon a 4-slab tax structure with lower rates for essential items and the highest for luxury items. Below are the details:

  • Zero Tax Rate: No tax will be levied on almost 50 % of items in the Consumer Price Index basket, including grains & other items used by the common masses.

  • 5% Tax slab: This will be levied on most common items used by large numbers of people.

  • GST will follow two standard rates of 12% and 18%, as decided by GST council.

  • All luxury items will fall under 28% GST rate slab, Which are currently taxed at 30-31 percent.

  • An additional cess would be imposed on luxury cars, tobacco products & aerated drinks beside the highest tax rate (28%).

The rates at which CGST and SGST would be levied after the Centre’s and States’ joint decision on it. The rates would be notified on the recommendations of the GST Council.

GST Council revises rates for 66 items June 2017

1. There would be two categories of GST rates on cinema, 28% in case tickets above Rs.100 and   18% in case of tickets up to Rs.100
2. Cashew revised from 12% to 5%
3. Packaged food, including some fruits and vegetables, pickles, toppings, instant food, sauces revised from 18% to 12%
4. Agarbatti revised from 12% to 5%
5. Dental wax revised from 28% to 18%
6. Insulin revised from 12% to 5%
7. Plastic beads revised from 28% to 18%
8. Plastic turpolin revised from 28% to 18%
9. School bags revised from 28% to 18%
10. Exercise books revised from 18% to 12%
11. Coloring books revised from 12% to nil
12. Pre-cast concrete pipes revised from 28% to 18%
13. Cutlery revised from 18% to 12%
14. Tractor components revised from 28% to 18%
15. Computer printers revised from 28% to 18%

Impact of Goods & Services Tax on the Real Estate Sector

Soon India will become a unified tax market with the implementation of Goods and Services Tax (GST) for various goods and services. While the impact of GST on various sectors and goods is quite clear now, real estate industry experts are still in dilemma over GST’s mpact on real estate as there is no clarity on the tax slabs for services on this particular sector.

As per industry experts, it seems that there will be a zero impact from cost perspective. Though there will be 12% taxation on work contracts and most of the construction materials will come under 18% and 28% slabs, it is believed that the availability of input tax credit will neutralize the overall impact of GST. However, everything will depend on the proper implementation and a proper system of claiming tax credits.

Surabhi Arora, Senior Associate Director, Research, Colliers International India said, “With the Real Estate Development and Regulation Act (RERA) also under implementation, developers may need to focus much more on streamlining their processes. We may expect initial teething issues, but implementation of GST should further enhance India’s attraction as an investment destination by encouraging greater transparency and ease of operation in all property deals.”

She also mentioned that it will be too early to decide whether the implementation of GST will actually lower down the prices in the commercial and residential segments.

According to Anshuman Magazine, Chairman, India and South East Asia, CBRE “In the long term, however, the successful implementation of GST in the country will be a game-changer for the market. The removal of various federal tax barriers and creation of a common market will improve supply chain efficiency and attract more FDI into the country.”

GST will not only attract Foreign Direct Investment in the country, but will also create more transparency in the real estate sector. “It will provide a thread for audit and checks for better control and monitoring of the sector. As a result, the home buyer will be empowered towards informed decision-making,” states Amit Agarwal, co-founder, NoBroker.

According to Mr. Aggarwal “GST will add up as another factor among the government’s other schemes towards affordable housing, which is beneficial to the growth of the sector. Buying a home will now be easier as benefits will now be extended to both the developers and the end-consumers.”

GST will be beneficial for home buyers who pay several state taxes at different levels, GST aims to remove this act of double taxation. NRI community will be high benefited towards investment in real estate through a total transparent process and channels. GST aims to remove multiple taxation at various labels while developing a unified tax system in the real estate sector. (Courtesy: The Financial Express)

How Goods and Services Tax affects your home loan, house construction, renovation and furnishing budget

GST rollout, launch in India: Finally, India is on the verge of witnessing a historic change from its current indirect taxation regime to the Goods and Services Tax (GST) regime with effect from 1 July 2017, with a grand ceremony on the night of 30 June 2017.

GST aims at eliminating the multiplicity of taxes and removing cascading of taxes which leads to a higher tax incidence on customers today.

Impact on renovation/construction budget of your house

contractor’s price includes heavy incidence of Central Excise duty, Entry Tax, Central Sales Tax on material and Service tax on services used in construction which is ultimately passed on to customers in the form of higher prices. The contactors shall have to pass on the benefits of lower tax burden under the GST regime to the customers by way of reduced prices as the contractors will be eligible for credit of GST paid on the material and services used in construction.

Impact on interior decorator services

Interior decorator services to get dearer by 3% since GST will be charged at 18% vis-à-vis current Service tax rate of 15%.

Impact on loan processing charges of banks

GST will be applicable on financial services, at 18 per cent vis-à-vis the current Service tax rate of 15%. Be ready to shell out more money as taking loans is going to get expensive.(Sources: financialexpress)

Courtesy: The Economic Times, Central Board Excise and Customs

Latest News on GST

  1. (12.07.17) Government launches GST Rate Finder app to end confusion about multiple tax slabs – Finance Minister Arun Jaitley along with CBEC officials launched an app called the GST Rates Finder that will help traders and consumer find the GST rates for various commodities and services. The app is available on the Google Play store and its description reads: ‘A simple app to search through the various goods and services and their respective GST Rates and details. Search the entire list or respective categories of taxes for Goods and Services’.(Sources: Business Today)
  2. (06.07.17) GSTN unveils Excel template to assist taxpayers – Goods and Services Network (GSTN) has unveiled a simple Excel-based template that will facilitate the taxpayers in preparing and filing their monthly returns with maximum ease and minimal cost.(Sources: indiainfoline)
  3. (28.06.17) E-commerce sales likely to decline 10-15% from next month – India’s online retail market is gearing up to brave another jolt. The implementation of goods and services tax (GST) from July 1, 2017 is likely to impact the sales of the e-commerce firms by at least 10-15 percent, for the first couple of months, owing to expected price hike of products and delisting of non-GST compliant sellers.(Sources: moneycontrol)
  4. (22.06.17) GST to lower loan EMIs for under construction homes – The Goods and Service Tax (GST) regime which is set to kick start from July 1 has the potential to make your home loan EMI cheaper in the coming months. As per Ministry of Finance, construction of flats, complex, buildings will have a lower incidence of GST as compared to a plethora of central and state indirect taxes suffered by them under the existing regime.(Sources: Indiainfoline)
  5. (21.06.17) Credit card bill, insurance premium to get costlier – Credit card providers, banks and insurers have started alerting their customers to pay higher tax post implementation of Goods and Services Tax (GST) from July 1. Customers currently pay 15 per cent service tax for such services. Starting from July 1, 2017 the GST will replace all indirect taxes like service tax and VAT. Financial services and telecom have been put in the 18 per cent GST slab. (Sources: Economictimes)
  6. (20.06.17) GST Council fixes tax rates for hotels and lotteries – The GST Council has fixed the tax for hotel rooms costing between Rs 2,500 to Rs 7,500 at 18%. While the cost of eat-out restaurants was fixed at 18%, down from the 28% decided earlier. The Council fixed the tax for state-run lotteries at 12% and of state authorized lotteries at 28%. (Sources: TimesOfIndia)

Leave a Reply

Your email address will not be published. Required fields are marked *