India Inc., Sr. Govt. Officials & Tax Experts on ‘GST Rate Structure’

“Moving the GST rate to 28 percent many of the items today that are in any case effectively taxed at whatever 28-29-30 percent that will be retained but it will also that extra amount that one might get relative to what we have proposed will allow a lot of the goods that currently were proposed at 26 percent to come down to 18 percent. So, it is both keeping the tax about the same on the relatively high end goods in the 26 percent category but also financing a kind of tax reduction for many items consumed as the Finance Minister said by lower and middle class people. There are lots of item oil, toothpaste, furniture, refrigerators, lots of consumer items. So, it actually allows the middle class and lower middle class to benefit from that. 

We have decided in principle on the structure and broadly on what kinds of goods will go where but the exact allotment will now be determined by the group of committee of secretaries. cesses are only on four commodities. So, the differential will apply only to four commodities that today are taxed at those high rates which is aerated beverages, luxury cars, tobacco and then of course the clean energy cess as well. So, cesses on five - but in case of the clean energy it is not part of the 28 percent, that is a separate thing. The additional cess is on four items. , 

Due to revenue neutral rate there will be efficiency gains which could finance some of the revenue. So, to that extent it is going to reduce de-facto in a reduced incidence from the consumer absolutely relative to today.” 

“Some essential commodities will be taxed at zero rate and the rate for gold will be decided in the next meeting.”

“Compensation of revenue loss due to implementation of the goods and services tax (GST) by states are not going to put a burden on central government finances. Now, you have a system by which additional burden of compensating the states is not being passed to consumers in a way it would have otherwise passed on in terms of taxes. So, this is very reasonable arrangement that has been agreed to keeping in view the interest of consumer and state governments. 

About Rs 50,000 crore will be needed to compensate states for loss of revenue from rollout of GST, which is to subsume a host of central and state taxes like excise duty, service tax and VAT, in the first year beginning April 1.”

“The committee of secretaries will be examining the item wise list as they are prevalent today in the VAT and central excise regime and then coming to some sort of a recommendation to the council. These are decisions which the council will be taking thereafter.

The committee will look at the definition of luxury as they are in the VAT structure and also at the central excise structure as it stands today and then come to a conclusion and accordingly recommend the rates for the council.” 

Important now to see what fits into what rate than the slabs themselves. I think one of the views which initially how it starts off was that you will start funnelling the current rates so that the incidence of taxation that is today will be maintained by and large. in some ways the biggest challenge would be to do the fitment of commodities in line with the current realities of the new emerging India. 

Also on the issue that and I think it is a big point that has not been highlighted is that there is no exempted commodity. If there are commodities they are under 0 category. So, you need to look at 0 percent also as a rate. I would imagine what was in earlier debate when we started this whole process was called the revenue neutral rate, it will get replaced in some way by a weighted average rate of GST. 

The real issue which did not get resolved to satisfaction of everybody and I am included in that is using cess or rather using GST revenues to fund compensation. It is something that actually has contributed to a rise in the rates.

A multiple GST slab rate structure was inevitable. 

The GST rate on services remains undecided but may fall under 12 or 18 percent slabs. Gold may be charged at around 2-4 percent GST.

To me this is not unexpected, it pretty much sort of moves along the lines that was indicated on the last occasion. The really redeeming factor is how large the impact and coverage of the nil or 0 and the 5 percent rate is going to be. The fact that everything in the CPI will end up there I think is really good news in terms of all the apprehensions on inflation etc. 

Coming to 12 and 18 percent, to my mind this is where you probably will see your pharma and other products sort of basketed into that sort of a rate. 

Coming then to where you are going to be at the 28 percent and the sense that all white goods are going to go there, we must bear in mind one situation that once we see this whole rate structure and if you compare it with the fact that if you took the tax burden that products suffer today and that range being between about 22 percent to 34 percent, when you see these rates in the background of that we must realize that apprehensions in terms of how prices will get impacted, will there be greater tax outflows, really needs to be placed in context that in any event in a majority of products we are going to see a situation where the tax burden will be lesser. 

Coming to the 28 percent and then coming to those 4 products which will also suffer a cess, traditionally those are your categories that people feel should suffer higher tax. To me the big news is the wide coverage of the 0 and 5 percent.

Edible oil will be in the 5 percent tax slab, while hair oil will be under 18 percent. We will have to wait and watch. The breakthrough, which came about in the Finance Minister Arun Jaitley-headed GST Council meeting on Thursday, is slightly different from what the Centre had proposed last month. 

The increase in working capital needs of FMCG companies will be marginal, not substantial. There won’t be a major inflationary impact arising out of the GST roll-out. 

The government is moving faster on the GST rollout and as of today it will keep its April deadline for the implementation. 

Lower rate could result in wider coverage which is the primary objective of GST. A lower rate could also lead to more spending hence a buoyant economy, leading to a beneficial environment for business. 

28 percent is a bit of a surprise; we were expecting it to be in the 25-26 percent range. I am assuming that all or most of our cosmetic and toiletry products will come under 28 percent category, some of them might come under 18 percent, but this 28 percent is the rack rate for this category then we have around 3-4 percent downside, currently we are paying around 24-25 percent excise cum the state VAT.

Packaged consumer goods toothpaste etc it is pretty unclear as to which bracket they would be, they could be at 12 percent, they could be at 18 percent, they could be at 28 percent and the impact of any of this move is going to be quite large for any of our businesses or any person playing in this categories. Till that clarity is obtained I think we are really shooting in the dark.

I think to have 4 GST rates at 5, 12, 18 and 28 percent is a reasonable thing to do, to that extent I don’t have any concern, where my concern is what is the standard rate and I thought 18 percent was a standard rate and most goods would fall under 18 percent.

Bit surprised that even small cars are talked about as being a 28 percent rate, because a 28 percent rate means that the GST simply becomes the current excise plus VAT and in fact it is probably marginally higher than current excise and VAT. 

The second benefit of GST is still hopefully remain and it does simplify makes India as one market and hopefully that will not get compromise and will remain, but 28 percent rate for even a small cars is certainly disappointing and I would have expected that to be in the standard rate whatever that was. More clarity is required on the definition of luxury cars.

Don’t want a reduction of tax but opines that all tobacco products should be taxed equally. Currently bidis are taxed at a lower rate than cigarettes.

Happy that the proceeding has culminated into GST rates, that is as far as the rates are concerned. The rate of any particular commodity is a decision of the sovereign and as a responsible company we appreciate the decision of the sovereign. 

On the technical side of the cess it can be levied in two different ways. If it is levied as a top up inside the GST as a supply based tax then the event would be a supply. Suppose the government uses the residual taxable part and go for a separate law for cess then the taxable event could be manufacture. If you do that way then you are destroying the functionality of this whole approach which I wanted for the tax that there will be no distinction between whole goods, processed goods produced in other plants or goods produced in my plant A versus produced in plant B. This was all the advantage of a supply based tax. All this substitution or this additional levy would now take away the advantages which were ingrained in the draft model law. This is all extremely technical.

With GST rates announced today, there is a good progress in this journey to have GST by April 2017. With half the CPI basket at 0 per cent and a majority of daily consumption essential items at 5 per cent, it will keep inflation in check. Looks good and progressive tax regime. 

The GST Council discussions are going on currently and we are waiting to get more clarity -- it's too early for us to comment on the current developments.

This is definitely a good sign and positive development for the consumer durable industry. Lower tax will also add to the growth of the overall industry and the benefits in due time will be passed on to the consumers. 

Good that we have arrived at some kind of consensus on the rate structure and we must give credit to the Goods and Services Tax (GST) council for having arrived at a unanimous decision on the rate. And as the Finance Minister said some time back in a country which is as diverse and complex as India. Having four rates is good enough provided we stick to these four rates and we don't have variants and sub-variants of these rates. 

There will be a certain amount of uncertainty till the list comes out but I will draw comfort from the fact that the Finance Minister mentioned that the object was to achieve revenue neutrality. In fact he gave an example of certain products where he said look, this is the excise and this is the VAT and this is the cascading and therefore this is the way the tax is. So, if that level of clarity is there even with the committee of secretaries as they decide the rate they will try to ensure that the GST does not have any kind of an inflationary impact.

While the consensus on rate structure among the Centre and the states seems to be a step closer towards timely implementation of GST, the essence of the multiple split tax rates will need to pass the test of industry acceptance on grounds of revenue neutrality and zero cascading across sectors specially goods falling in the 28 per cent bracket.