Published Editorial

Good that GST rates for products & industries do not hurl any unpleasant surprises

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Economic Times


Abhishek Jain,
Tax Partner, EY India

Aligned to the Government’s indomitable efforts for a July 1 roll out of GST, the GST Council at its Srinagar meeting yesterday finalized the rates for most products with a go ahead for 7 Rules relating to Input Tax Credit, Valuation, Refund, Composition, Registration, Payment & Invoice.

Consistent with the proactive outlook of the Government, the rates so agreed to by the GST Council and the revised Rules were released post the Council meeting in the public domain. While the revised Rules so released do not include loads of modifications, however, clarification of a 18% rate on advances for which tax is not determinable was a bolt from the blue.

The much awaited GST rate fitment structure comes as a mixed bag for the various sectors like household, industry, etc. Aligned to the Government’s assurance of GST softening prices for a common man in particular, lower rate of 5% has been approved for various essential products like coffee, tea, cane sugar, spices, edible oils, etc.; entailing not much of a prick on the pockets of a common man. Similarly, approval for a zero rating on various products like wheat flour, puffed rice, bread, newspapers, milk etc. has been accorded even under the GST regime.

Also, in the backdrop of Government’s concerted efforts for a green environment, a lower rate of 5% has been approved for various renewable energy devices; the same witnessing an increase or decrease vis-à-vis the current regime basis the current state of operation. For the thermal power plants, with an approved GST rate of 5% for coal with an additional cess of INR 400 per tonne, the prices of coal may witness an increase or decrease depending on the current supply chain arrangement and state of operation.

While broadly, the approved GST rates for motor vehicles is in alignment with the industry anticipations, an additional cess of 1%/ 3% on small cars came as a surprise; with industry expecting only a 28% levy on small cars with no cess.

Also, depending on the supply chain structure and state of operation, a commoner could expect a 2 to 3% plus or minus impact on white goods like televisions, washing machines, air-conditioners, etc., given the approved 28% rate of GST on such products

The Government aligned with its negative outlook to deleterious goods, proposes a higher tax of 28% with additional cess ranging from 12% to upto 290% on ‘sin goods’ which essentially includes aerated drinks, cigarettes and tobacco products.

While the GST rates on goods so released by the Government in the current form do not hurl any unpleasant surprises for most products/ industries, the rates for the remaining products and services would help better evaluation of whether implementation of GST entails increased pocket pricking for customers and industries as a whole.

(Views expressed are personal)