Will The GST Overhaul And Its Tax Cuts Be A Game Changer?

The union government which is under tremendous pressure from the recent failures of “demonetisation” and GST, has slashed the prescribed rates on certain consumer items and services. The move which comes in the wake of Gujarat elections is supposed to rejuvenate the failing industries and encourage consumer confidence. The 23rd GST Council meeting, held in Guwahati offered tax cuts for over 200 items and is expected to cost the government over 20,000 crores. Here is a comprehensive look at the recently announced revamp applicable to the GST.

GST 2017 Revamped

0% Tax Rate:

Goods:

• Essential food items like fresh fruits and vegetables, fish, chicken, eggs, milk, bread, flour etc.
• Paper products like newspapers, books, stamps, children’s colouring books, judicial papers etc.
• Common household items such as dried vegetables, brooms, bangles, kajal, salt etc.

0.25% Tax Rate

Goods:

• Unsorted rough diamonds
• Rough industrial diamonds

5% Tax Rate

Goods:

• Food items such as tea, coffee, fish fillet, skimmed milk powder, cashew nuts, raisins, oil cakes, plain chapatis, rotis, etc.
• Essential items like medicines, stents, lifeboats, biogas, insulin, ayurvedic medicines etc.
• Other items such as rosaries, saree falls, corduroy fabrics, kites, glass, pouches wallets, etc.

Services:

• Textile job work
• E-waste transportation
• Food parcels
• Air and railway transport services

12% Tax Rate

Goods:

• Food items such as frozen meat, cheese, ghee, butter, sausage, ketchup, idli batter, animal fat etc.
• Construction items such as wood, stone, metals etc
• Common items such as cell phones, umbrellas, agarbathis, spoons, forks, rubber bands, notebooks etc.

Services:

• Business class air tickets
• Non-AC hotels
• State-run lotteries
• Fertilisers
• Work contracts

18% Tax Rate

Goods:

• Consumable items such as refined sugar, pasta, cornflakes, pastries, jams, soups, ice-cream, chewing gum, white chocolate, cocoa powder, non-alcoholic beverages etc.
• Consumer durables such as hard rubber, PVC conveyer belt, leather, paints, varnishes, aluminous cement, slag cement, etc.
• Other items such as personal deodorants, trunks, suitcases, toilet cases, handbags, camera cases, gun holsters, etc.

Services:

• Restaurants in hotels with tariff rates above 7500
• Telecom services
• IT services
• Outdoor catering
• Branded garments

28% Tax Rate

Goods:

• Consumables such as molasses and aerated water
• Consumer products such as ceramic tiles, dishwashers, water heaters, washing machines, vacuum cleaners, automobiles etc.
• Other items such as bidis, pan masala, sunscreen, etc.

Services:

• Private run lotteries
• Cinema halls
• Race club betting

The new GST rates have been introduced as a major step towards consumer appeasement. The problems, however, are many. The 5 percent tax slab given to restaurants will be beneficial for the customers but will result in the former’s operating costs rising to 18 percent. This disparity in offering equal benefits to the consumer as well as the manufacturer has been one of the major drawbacks of the GST. The public perception of these steps will be interesting to see as the elections loom closer.