Many concerns still remain about GST structure and impact

UNI
Wednesday, 14 June 2017

A major announcement by the government that Goods and Services Tax (GST) on 66 items is being reduced just ahead of the rollout of the new tax structure has been welcomed by all. However, it also throws light on the fact that while originally designing the tax structure; small but essential items such as school notebooks and insulin were taxed at very high rates. That exposes the fact that perhaps proper attention was not paid earlier while designing the categories.  

A major announcement by the government that Goods and Services Tax (GST) on 66 items is being reduced just ahead of the rollout of the new tax structure has been welcomed by all. However, it also throws light on the fact that while originally designing the tax structure; small but essential items such as school notebooks and insulin were taxed at very high rates. That exposes the fact that perhaps proper attention was not paid earlier while designing the categories.  

Now, just two weeks before the government ushers in the GST regime - billed as the biggest tax reform to create a uniform market in India. The GST Council decided to cut taxes on 66 items, Finance Minister Arun Jaitley announced the revised GST rates on Sunday. “A total of 133 representations were made to lower taxes for different categories of goods and commodities. The council has lowered the tax on 66 items,” Jaitley told the media after the 16th meeting of the GST Council that includes all state finance ministers.

Following the revised rates new tax structure that will be applicable from July 1 this year, packaged food items like pickles, ketchup, toppings, instant food mixes will all be cheaper as GST on these items have been reduced to 12 per cent from earlier 18 per cent. People with diabetes also have something to cheer as insulin will be cheaper. Earlier, it was put in the 12 per cent slab but now, it has been brought down to 5 per cent.

While school bags will be cheaper as GST has been slashed from 28 per cent to 18 per cent, young children can have fun with colours as drawing book are now tax exempt from an earlier 12 per cent. Cutlery will cost less - with the tax reduced from 18 to 12 per cent - and so will computer printers and CCTV cameras. These items that attracted 28 per cent GST will now be at the 18 slab. The issue of entertainment tax that has been flagged by superstars like Kamal Hassan was also taken up and a compromise formula arrived at.

The structure for entertainment tax may remain arguable the fact that school notebooks and drawing books were earlier taxed at 28% has surprised many. Entertainment tax currently is imposed by state governments. And the range is from 20 per cent to 110 per cent. The weighted average comes to about 30 per cent. But state governments also give exemptions to film in their own language. The finance minister said, “We have now made two categories for entertainment tax.” A film for which tickets are priced above Rs 100 will attract 28 per cent while those film with tickets priced at Rs 100 or below would be in the 18 per cent slab.

Because of these changes, some small scale manufacturers and traders are also big gainers. Those whose annual turnover was less than 20 lakh won’t have to pay any tax. Entrepreneurs whose turnover is between Rs. 20 and Rs 75 lakh, will have to pay nominal taxes under the composition scheme. “Under the composition scheme, if trader you have to pay 1 per cent tax. Manufacturer will have to pay 2 per cent and restaurant owners 5 per cent,” said West Bengal Finance Minister Amit Mitra and added, “These are people centric measures.” Over the last three weeks, the Council - comprising the Union and state FMs - had decided the rates for 1,211 goods and around 500 services and had been flooded with requests for revision.

All goods and services have been put into four tax slabs of 5, 12, 18 and 28 pc in addition to several mass consumption items that will attract zero tax. Some people are also expressing concerns about the number of times a company or an individual will have to file returns in a year, Some sources suggest that companies may be required to file returns 36 times or 39 times a year. A lot of these concerns have to be addressed by the government so that the main purpose of the GST regime of bringing simplicity and clarity in taxes can be easily achieved.

NEW TAX, NEW RATES
Some sources suggest that companies may be required to file returns 36 times or 39 times a year. A lot of these concerns have to be addressed by the government so that the main purpose of the GST regime of bringing simplicity and clarity in taxes can be easily achieved.

- Rohit Chandavarkar

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