GST: A worry for some ahead of festive sales

Faced with an early festive season, consumer goods and durables companies are concerned about smooth and quick implementation of the goods and services tax (GST), to avoid any negative trade impact in the crucial third quarter.

Varun Berry, MD, Britannia, said, “While GST is a huge long-term positive development, there are bound to be trade disruptions. Procedural details have to be sorted out on a priority basis across stakeholders before September 1, with the festive quarter being earlier this year.” Already, trade channels are destocking to avoid tax payout disparity ahead of the GST rollout.

Sunil Duggal, chief executive, Dabur, said, “Last year, the festive season was impacted by demonetisation. We hope to get GST issues streamlined by August-end and mitigate its impact. We may choose to reduce inventory pipelines even if it means taking a sales hit in June.”

Debashish Mukherjee, head of consumer and retail at management consulting firm AT Kearney, said, “Anything from 45 to 75 days of stock needs to be in the system. It is critical to sort out GST implications on transition inventory. Fast moving consumer goods and durables are seeing green shoots of sustained growth now, after demonetisation and general economic softness. It is important that momentum is maintained this year, including into the festive season.”

The festive season starts in the fourth week of September this year. The wholesale distribution channel — which contributes up to half of the revenue of FMCG companies — is under pressure. Television and home appliance makers are equally worried about GST impacting festive sales, contemplating ways to soften the expected price hike and planning larger consumer promotions.

“The most obvious way to mitigate poor sentiment is to opt for smaller hikes —instead of straightaway passing on the full price increase — to cushion demand ahead of the festive season,” said CM Singh, chief operating officer, Videocon. A two-phased price hike would serve to alleviate any immediate 4-5 per cent increase and also helping absorb part of the price increase if demand does not revive by August, so the festive season remains insulated, said two senior industry executives.

Pulkit Baid, director, durables retailer Great Eastern, said brands are in a catch-22 situation on post-GST pricing. “They can neither absorb costs nor pass it to the consumers. They may break the price hike in two phases so the transition appears smoother.”

Kamal Nandi, business head, Godrej Appliances, said all brands will go big on promotions and offers this festive season to offset losses from already weakening sales, which may stay this way till June. “The ray of hope is expectation of a normal monsoon, which will boost rural demand. Also, some arrears of the Seventh Pay Commission are likely to come in, helping push urban demand and upgrade.”

Prices of televisions, refrigerators and air-conditioners are set to go up by 4-5 per cent from July, with the GST Council proposing the 28 per cent bracket for consumer electronics and durables, compared to the current tax rate of 23-24 per cent. Mass consumption products like toothpaste, soaps and hair oil have been taxed at 18 per cent, which is significantly lower than the earlier 22-24 per cent. Others such as detergents, shampoo, softdrinks, liquid soaps are in the tax slab of 28 per cent.

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items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List    

Banks will have a hard slog ahead to get GST-ready

The banking sector, one of the largest service sectors in the country, will have to put in plenty of hard work to get Goods and Service Tax (GST)-ready.

While the change in tax rate is grabbing the headlines, that is actually one of the many changes to which banks will have to adjust. For most categories of chargeable banking services, the effective tax rate will become 18 percent from the current 15 percent (at present it includes Swachh Bharat and Krishi Kalyan Cess). Banks will definitely pass on this extra levy on to the customers. As users of banking services, prepare to shell out a bit more.

Lower ITC than manufacturing

Since banking companies provide a lot of taxable and tax exempt services and it since may be tedious to maintain details of taxable and exempt services every month, the government has provided them an option to comply with the provisions of Input Tax Credit (ITC) reversal on proper calculations or avail of 50 percent of the eligible input tax credit on inputs, capital goods and input services, with the rest lapsing.

Higher compliance requirements

At present banks discharge their service tax compliances through a single ‘centralised’ registration. However, under GST, they would have to take separate registrations for each state where they operate. In addition, there will be an increase in the periodicity of returns, number of return formats and level of details required in these returns.

According to Siva Subramaniam, Product Head – Banking & Financial Services at SunTec Business Solutions, “Manufacturing companies were used to paying state-wise VAT, but banks are centralised, so they face more challenges under GST.”

Banks need to define – origin and destination

GST is a consumption-based tax regime. Hence, for every transaction in GST, the bank will need to determine the place of consumption where GST will be paid. With bank branches conducting several transactions, both within and outside states, determining the place of supply will not be a very easy task.

The Model GST Law casts the onus of determining whether a transaction is intra-state or inter-state on the assessee.  So, banks will need to decide whether the payment is against Central GST (CGST) and State GST (SGST) or Integrated GST (IGST), based on the type of transaction.

Moreover, inter-state supplies of goods or services (or both) between two branches of the same bank, located in two States, will also attract IGST. The GST charged will be available as credit to the receiving branch; however, tracking such transactions could prove to be a cumbersome task.

Banks will have to have the GST-ready infrastructure in place. Unlike manufacturing, banks typically have multiple softwares for different lines of businesses and will need to have a GST-ready solution on top for each.

Availing services of unregistered vendors

Another area that may have to be reviewed by banks is taking services from unregistered vendors. While the rules so far specifies that companies availing of services from unregistered vendors (turnover less than Rs 20 lakhs) will be subject to reverse charges (where the recipient is liable to pay tax), as of now there is no clarity if reverse charge qualifies for Input Tax Credit. The government may also specify the limit for availing supplies from unregistered suppliers.

Define jurisdiction of the services availed

The complexity is not just about services rendered but also the services that the banks avail. There has to be a specification of the jurisdiction of the services consumed say between branches (according to states) and the head office. For instance, if a bank avails of advertising services from an advertising agency, it has to specify the percentage distribution of this service across states.

The concept of Input Service Distributor (ISD) is provided in GST. It is defined as ‘an office which can be a head office, administrative office, corporate office, so on, belonging to registered taxable person who intends to distribute the credit’.

Under GST, on an intrastate transaction, CGST and SGST will be applicable. In case of transaction within a union territory, CGST and UTGST will be applicable. IGST will be applicable in case of interstate transactions.

Is the sector ready?

Invoices will have to be uploaded before filing returns. But the above-mentioned backend readiness will have to happen before they file the first tax return on August 14.

According to industry sources, many banks started the preparation as early as January to be ready by April. Private sector banks again have taken the lead in getting backends ready. While the incremental cost is unlikely to jolt numbers, bank employees should nevertheless brace for another round of sleepless nights coming close on the heels of the overtime work that they had to put in the aftermath of demonetisation.

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items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List    

GST to boost growth, says World Bank

The economy will grow 7.2% in 2017-18 and 7.7% in 2019-2020 and implementation of the goods and services tax (GST) will provide a big boost to overall economic growth and revenues, a World Bank report said on Monday.

According to Junaid Ahmad, World Bank country director in India, the GST would reduce the cost of doing business for firms, reduce logistics costs of moving goods across states, while ensuring no loss in equity.

“Low female labour force participation, however, remains a serious concern. Higher level of women participation in the economy can help propel India closer to double digit growth,” he said.

The Indian Development Update said that India’s economy was slowing down in early 2016-17, until the favourable monsoon started lifting the economy, but the recovery was temporarily disrupted by the government’s “demonetisation” initiative.

While limited data is available, demonetization may have had a disproportionate impact on poorer households, which are more likely to work in construction and informal retail, the report said, adding that despite this, there was a relatively modest slowdown in the economy.

The report attributes it to coping mechanisms (which included greater usage of digital transactions), higher rural incomes, and robust public consumption. tnn
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GST : TV, AC to cost more; smartphones to be cheaper

Aerated drinks and consumer durables like TV, AC, washing machines and refrigerators will cost more, while smartphones, small cars and daily use items will turn cheaper when the GST is implemented from July.

An analysis of the tax rates decided by the all-powerful GST Council for over 1,200 goods and 500 services revealed that daily use items like soap and toothpaste will cost less while fresh fruits, vegetables, pulses, bread and fresh milk will continue to be exempt from any tax.

Economy-class air travel will be slightly cheaper and so will be hiring a taxi as tax on such travel has been brought down to 5 per cent in the Goods and Service Tax (GST) regime from the current service tax of 6 per cent.

Foodgrains may also become cheaper as they have been put in zero-rated commodities list. Currently, some states levy purchase tax of 2-5 per cent on foodgrains, which will be abolished under GST.

The GST Council had earlier this month put over 1,200 goods and 500 services in four tax slabs of 5, 12, 18, 28 per cent.

While the tax incidence on certain commodities like processed food, confectionery items and ice cream would be brought down to 18 per cent from 22 per cent, personal care items like shampoo, perfumes and make-up items would cost more as the tax rate will go up to 28 per cent, from the existing 22 per cent.

Among the goods, mass consumption items like fresh fruits, vegetables, pulses, bread and milk have been exempt from any taxes, and the same holds true for services like health and education.

Although the real estate sector has been kept out of the GST, under-construction property would be subject to 12 per cent GST rate, as against the present incidence of 15 per cent service tax.

Taxi aggregators will also see marginal reduction in tax rates as the effective rate comes down to 5 per cent from 6 per cent. Motorcycles could also see some reduction in prices as the levy will come down by a percentage point to 28 per cent.

While electrically operated 2/3 wheeler vehicles will also see a decline in taxes from 14 per cent to 12 per cent, solar panels could see a steep hike in tax rates to 18 per cent from the present 0-5 per cent.

The tax incidence on soaps and toothpaste under the GST regime would also come down to 18 per cent from the existing 25-26 per cent.

Cost of packaged cement is expected to ease as the tax rate will come down to 28 per cent from the existing 31 per cent.

Medicines, including ayurvedic drugs, as also medical devices will face a lower incidence at 12 per cent, compared to the existing 13 per cent.

Smartphones should also get cheaper as the current tax incidence on them is more than 13.5 per cent, while the proposed GST rate is 12 per cent.

Besides, puja items, including those for havan, bindi and kumkum have been kept in the exempt category.

Taxation on entertainment, cable and DTH services shall also come down as the ‘entertainment tax’ levied by states has been subsumed in the GST and the effective levy has been kept at 18 per cent.

Currently, these services attract an entertainment tax in states in the range of 10-30 per cent over and above the service tax levy of 15 per cent.

Under the GST regime, five-star restaurants will see an increase in tax incidence, while the levy on non-AC restaurants may come down marginally.

At present, non-AC restaurants are subject to state VATs in the range of 12.5-20 per cent, while AC restaurants are levied with a 6 per cent service tax on top of state VAT.

Under the GST regime, restaurants not having AC and liquor licence will attract 12 per cent levy. On restaurants having AC or liquor licence, the tax would be 18 per cent. Five-star or above restaurants will be taxed at 28 per cent.

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Nagaland Assembly Passes State GST Bill

The Nagaland Assembly today joined the rest of the country in passing the Goods and Services Tax (GST) Bill.

The bill was passed by voice vote at the special session of the House.

The bill was introduced by Chief Minister Dr. Shurhozelie Liezeiestu, who also holds the Finance portfolio.

Initiating a discussion before passing the bill, Minister for Roads and Bridges Y Vikheho Swu apprised the MLAs about the benefits in implementing GST in the state.

If implemented properly, the GST will bring a number of benefits to the state such as benefits for trade and industry, benefit to the consumers, besides an increase in revenue generation for the state, he said.

However, there are challenges too, where the business community and the public will have to align with the new system in order to keep up with the change, Mr Swu said.

With the GST, multiple layers of taxation will be eliminated, production at both national and international level will receive a boost, cost of production will be cut, goods and services will become cheaper besides the state will be able to earn more revenue, he said.

Participating in the discussion, Parliamentary Secretary for Housing Levi Rengma, Parliamentary Secretary for Tourism C Apok Jamir, Minister of School Education and SCERT Yitachu and MLA T R Zeliang expressed hope that implementation of the GST would not only benefit the state but also the consumers as prices of commodities will also go down.

Chief Minister Dr Liezietsu said that the GST regime will open a new era in the indirect taxation structure and administration in the country.

He said that presently there are multiple subjects on which taxes are levied and collected throughout the country yet various provisions of the Constitution provide the sanction and clearly define the subjects on which the Centre and the states can levy and collect taxes.

In the present tax regime, he said, if all the sale points happen to be within the state, there is some relief in the form of VAT wherein one is allowed to take the credit for the tax, already paid in the previous transaction.

However, he said, the tax structure does not provide any relief in the form of tax credit, if the goods are manufactured somewhere else and reaches Nagaland after passing through many intermediate taxpaying sellers, located in some other state or states.

Dr Liezietsu said the idea of the new GST regime is to make the entire indirect taxation process more transparent, more effective and easier to implement.

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GST Bill passed in Himachal Pradesh

Himachal Pradesh Assembly in its special session held on Saturday unanimously passed the Himachal Pradesh Goods and Services Tax Bill, 2017. The Bill has multiple provisons like recovery of arrears of tax using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person and powers of inspection, search, seizure and arrest to the officers.

While presenting the bill in the assembly, chief minister Virbhadra Singh said GST will bring down the cost of goods and services as there will be no cascading effects of taxes. He added that GST is expected to increase revenue by widening the tax base and improving the taxpayer compliance. 7% items are such on which no taxes would be levied, 14% items would be in the lowest bracket of 5% tax, 17% items will have 12% tax, 43% items will have 18% tax, and 19% items, which are generally not used by people will have 28% tax.

“It would be a dual GST with the Centre (CGST) and states (SGST) simultaneously levying tax on a common tax base,” he added.

Leader of opposition Prem Kumar Dhumal said earlier traders and businessmen had to pay various taxes but with the implementation of GST from July 1, consumer, trader and middleman would have to pay single tax. He said 150 countries that have adopted GST have witnessed a growth in their GDP by 1.5% to 2% and added that in India 1200 items under GST have already been decided to levy tax. Dhumal said GST would be consumer friendly and in the interest of people of Himachal Pradesh, which is a consumer state.
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GST: Five things you need to know

GST: Five things you need to know

Come July 1 and India will witness a new tax administration, which only happened 12 years ago when the Centre introduced the Value Added Tax (VAT) in India.

In its 14th GST Council meet, the rates for 1,211 goods and 36 broad categories of services have been decided with the exception of alcoholic beverages, petroleum products, footwear, textiles, gems and jewellery.

“Nearly 50 per cent of goods fall under the 18 per cent tax rate, About 14 per cent of goods fall under the 5 per cent tax rate, 17 per cent under the 12 per cent tax rate and 19 per cent under the 28 per cent tax rate. In case of services, a majority of services come within the 18 per cent tax rate,” a report by Care Ratings analyst Madan Sabnavis said on May 25.

What will be different under GST?

Under the current tax regime, taxes on goods and services are levied by the Centre and the states. These taxes, though they don’t overlap, were governed by laws and had at least 17 different rates. GST, which is scheduled to roll out from July 1, will make the levying of tax simpler. It will have just four tax rates at 5 per cent, 12 per cent, 18 per cent and 28 per cent, along with a fifth bracket for goods that will be exempted from the GST ambit. “The GST regime will subsume the various laws and there will be a single tax law and four tax rates that will be charged by the Centre and across states,” Sabnavis said.

Will things get cheaper?

One of the most common questions lurking in everyone’s minds seems to be whether things will get cheaper. Well, yes, and no. The decision to lower the tax rates of goods has been made for only certain products. For instance, soaps, toothpaste, soups, hotel bookings and even economy class air travel is expected to become cheaper post GST, given that they will be brought to a lower tax bracket.

However, the decision of how much to reduce prices will rest solely with each company. “Corporates will pass on direct tax benefits; however, they will aim to retain partly indirect benefits from savings,” Ravi Adukia, a Nomura analyst said on May 22. Price cuts are determined on industry dynamics, rivalry and competition. So, GST will not be a major factor in bringing down prices.

What gets more expensive?

Starting with personal care products like hair dyes, shampoo, cosmetics, skin care, and perfumes which are currently taxed at 26 per cent will go up to 28 per cent under GST. Prices of aerated drinks are also expected to go up as they have been put under the highest GST bracket of 28 per cent. Business class air travel has moved to the 12 per cent tax bracket instead of 9 per cent currently. Movie tickets, rides at amusement parks, and even five-star hotel stays will be under the 28 per cent tax bracket. An additional cess levied on luxury goods like expensive cars, branded watches and harmful products or demerit goods like cigarettes, pan masala, and tobacco will likely increase the prices of these products.

How does GST impact businesses?

To remove the cascading effect of taxes, which is currently faced by businesses, GST will allow input tax credit claims at every stage of goods supply. This was not available earlier.

The cost of transportation and storage of goods or logistics cost is also expected to become more affordable as it has been brought under the 5 per cent GST rate instead of the current 15 per cent tax bracket. This should help businesses focus on delivery and better service of goods. To claim tax rebates, businesses will have to source goods from registered vendors. This will help streamline business efficiencies.

Will GST have an impact on inflation?

The goods in the Consumer Price Inflation basket will be severely impacted by the changing tax norms. “The tax rates on food and beverages, that has a nearly 46 per cent share in the Consumer Price Index, which is used to measure inflation at the retail level, is likely to reduce by 2-3 per cent on an average owing to reduction in tax rates on edible oils, sugar and confectionary, spices, non-alcoholic beverages and prepared meals,” the Care Ratings report said.

items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List    

GST will remove barriers like octroi, entry tax: Adhia

Revenue Secretary Hasmukh Adhia has said that all the works necessary for implementation of the Goods and Services Tax have already been done, according to an opinion piece Adhia has written for The Economic Times.

He writes that prime benefit of the ‘One Nation One Tax’ regime would be that India will become a single nationwide market. “One product or service will have a single tax rate in any part of the country. The multiplicity of taxes on the same commodity or service will now go,” he says.

Adhia believes that India’s trade and industry outreach initiatives were running at full pace and it was high time that the country reflected on possible benefits of new indirect tax regime “to the trade and industry, to consumers, to the government and to the entire economy.”

Under the new GST regime, tax incidence on a product or service may get slashed for most items as cascading effect of various taxes will come to an end. Smooth and continuous credit flow across value chain will also help reduce the tax rates.

“If goods are produced in which services are used, the input tax credit of taxes paid on services will be available and vice versa,” Adhia explained the input tax credit in his opinion piece.

Source :

items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List    

Traders seek special slab of 1.25% for gold jewellery

While tax rates on gold jewellery in the upcoming Goods and Service Tax (GST) regime are still undecided, jewellers here are gearing up to make a case before Union revenue secretary Hasmukh Adhia who will visit Karnataka on May 29 and 30.

They are seeking a special GST slab of 1.25 % for jewellery .At present, gold jewellery attracts 1% value added tax (VAT), 1% central excise duty and 10% customs duty in case the yellow metal is imported. “Gold jewellery is a high-value commodity and it should be taxed below two per cent in the GST regime,” said G V Sridhar, immediate past president of All-India Gems and Jewellery Trade Federation. Sridhar, managing director of Srirama Jewellers, said they have already sent a representation to the Centre.

Hasmukh Adhia will meet trade bodies and industrialists ahead of the GST rolloutexpected on July 1. He will meet traders and tax payers in Mysuru on May 29 and is scheduled to address a meeting at Town Hall in Bengaluru on May 30.

“Meeting various stakeholders as a precursor to the GST rollout is a welcome move by the Centre. It would help resolve issues and address concer ns ahead of the new taxation system,” said B T Manohar, taxation committee chairman of the Federation of Karnataka Chambers of Commerce and Industries (FKCCI). He will lead the traders’ community during the interaction with Adhia.

The GST Council that met on May 18 and 19, classified most of the goods and services under five GST slabs, including 0 %, 5%, 12%, 18% and 28 %. The GST rates on jewellery , biscuits (confection ery), footwear and a few other commodities are yet to be finalized and the council is expected take a call on June 3.

The jewellers are concerned about higher tax rates that could hinder their business which has already taken a hit due to the demonetization drive.

“High rates on jewellery will help only some of the rich and defeat the cashless concept. It may even give rise to a rampant grey market. To avoid these, the rate must be kept at 1.25%,” said C Vinod Hatagriv, managing director of C Krishniah Chetty Group of Jewellers.

In the GST regime, sweet condiments like laddu will be taxed at 5% while spicy items like khara boondhi made of similar ingredients will attract 18%. The condiment traders want Adhia to ad dress this anomaly . This apart, both vehicles and spare parts have been put under 28 % GST slab, and the auto industry wants spare parts to be classified under lesser tax rate at 18%. Hotels to shut down on May 30 Opposing the decision to levy 12% GST on non-AC restaurants, hoteliers in Karnataka will observe a bandh on May 30.The food served in AC restaurants will attract 18%, while star hotels have been put under the 28% slab. At present, restaurants, irrespective of their turnover, are being taxed at 4%.

“Since eating out is going to be very expensive even at small eateries, we are seeking 5% GST for non-AC restaurants,” said P C Rao, vice-president of Bangalore Hoteliers Association.
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