All about GST and what it means for consumers

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Banking on the support of Congress and other parties, the long-pending GST Bill was listed for consideration and passage in Rajya Sabha on Wednesday.

The Goods and Services Tax (GST) Bill, which has been in the making for over a decade, entails introduction of a single indirect tax regime across the country. “The GST Bill is listed for consideration and passage on Wednesday in Rajya Sabha and we seek support of all political parties. The mood is in favour of its passage,” Parliamentary Affairs Minister Ananth Kumar said.

According to top government sources, a fresh round of talks was held on Monday with Congress and other parties, including the Left and Samajwadi Party, for building a consensus on the key tax reform legislation.

Finance Minister Arun Jaitley held further consultations with senior Congress leaders Ghulam Nabi Azad and Anand Sharma and chalked out details of the contentious bill aimed at bringing about a consensus on the key bill, sources said. Jaitley also met CPI-M general secretary Sitaram Yechury, besides some other leaders. Later, along with Kumar, he met Lok Sabha Speaker Sumitra Mahajan.

ALL ABOUT GST

  1. The goods and services tax (GST) is the most far-reaching tax reform in postindependence India, which aims to end the cumbersome regime of multiple taxes on goods and services and bring them under one rate.
  2. Central Excise duty, additional Excise duty and State level taxes like, VAT or sales tax, Central Sales tax, Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will be subsumed in GST
  3. There will be a Central GST (CGST) and a state GST (SGST)
  4. Petroleum & petroleum products (crude, high speed diesel, petrol, jet fuel and natural gas) shall be subject to GST on a date to be notified by the GST Council
  5. Provision for removing imposition of entry tax/Octroi across India would result in a smoother and quicker movement of goods across the country and bring to an end the serpentine truck queues at state borders
  6. The system will change from the current production-based taxation to being consumption-based
  7. Along with bringing about uniformity in taxes across states, this is expected to increase efficiency & compliance
  8. Estimates by various think tanks expect the country’s GDP to go up anywhere between 0.5 to 2 per cent with the ease of doing business and efficiency that the new tax regime will bring.

WHAT IT MEANS FOR THE CONSUMER

 

Most goods are expected to turn cheaper while services will become more expensive with the introduction of the new goods and services tax (GST) regime. For manufactured consumer goods, the current tax regime means the consumer pays approximately 25-26% more than the cost of production due to excise duty and value added tax. With the GST rate expected at 18%, most goods are expected to become cheaper.

“There are a large number of taxes on the goods industry which are going to be subsumed in the GST. The final rate of around 18% GST proposed on all goods is less than the cumulative tax rate presently due to various taxes. Also all credits would be available for the entire supply chain. Accordingly, the final cost of most goods should decrease and goods may become cheaper for the consumers,” Bipin Sapra Indirect tax expert of Ernst and Young told Mail Today.

“On the other hand the final rate of tax on services is going to go up in GST and accordingly, most services may become costlier for the consumers,” Sapra added. Certain essential items such as raw food articles are not taxed at present and this is expected to continue, he said. Processed food such as breakfast cereals and chocolates will continue to be taxed, but the applicable GST is likely to be lower than the current combined tax on such products. Hence, expect these to become slightly cheaper. On the other hand, for goods where the current duty structure is lower, can get more expensive.

SERVICES THAT COULD GET COSTLIER

The effective service tax rate at present is 15% and it applies to almost all services other than essential ones such as ambulance services, cultural activities, certain pilgrimages and sports events. If GST is implemented, this rate will increase to 18% making services more expensive. Consequently, eating out, staying at hotels and air travel will turn costlier. Similarly, insurance premiums and investment management which attract a service tax currently, will also become costlier with the higher rate of GST. According to an HSBC Global Research report services would see a rise in tax rates while manufactured consumer goods may see a fall. The two are likely to offset each other resulting in a limited net impact on inflation based on the consumer price index.

Source:http://www.businesstoday.in/current/economy-politics/all-about-gst-and-what-it-means-for-consumers/story/235689.html

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