India is all set to witness one of its biggest economic reforms since independence in the GST rollout from July 1. However, this far-reaching indirect taxation system is being implemented not without its share of unawareness and doubts among both business owners and consumers. Given so, as the countdown towards a 'one nation- one tax' regime begins, The Pioneer brings the low-down on what the Goods & Service Tax really is and how it will affect your life.
"To give a broad overview, after GST around half of taxable goods and services will remain at similar prices as earlier, 30 per cent items will become cheaper and the prices of 20 per cent of taxable goods and services is likely to go up. The Government has done a fair job in fixing GST rates to suit the economic disparities of India's population,"said Verendra Kalra, managing partner of Verendra Kalra & Co. Chartered Accountants, in an exclusive discussion with The Pioneer on GST. He, however, also pointed out that businesses in Uttarakhand are poorly prepared to adopt GST. "Only a day is left and many business owners are not even aware of the essentials, like that they require new invoice formats etc. for filing GST returns. There is a lot of confusion regarding the new tax rates and process," said Kalra.
Here are the basics- GST will replace all indirect taxes levied by State and Central Governments. There are four slabs for GST for both goods and services - 5 per cent, 12 per cent, 14 per cent and 28 per cent. There is an additional cess on specific items like luxury goods. Certain items have been exempted from the tax base completely.GST has two components- Central GST (CGST) that will be levied by the Centre, State GST that will be levied by States and there will also be another component of Integrated GST (IGST) levied by Central Government on inter-State supply of goods and services.
And how will life change for the common man come July 1IJ
Daily needs essentials like fresh vegetables, fresh fruit, food grains, pulses, meat (except frozen), fish, fresh chicken, natural honey, eggs, generic (non-branded) curd, butter milk and cottage cheese, bread have exemption from taxation.Clothes above Rs 1,000 will cost more after GST while luxury cars like Mercedes, Audis &BMWs will be cheaper with lesser duty on these models. Currently the tax on luxury cars ranges from 45 to 55 per cent but under GST with the maximum cess on luxury cars getting capped at 15 percent, the maximum duty a buyer is likely to pay is 43 per cent. There will be only a marginal increase in the duty on small cars, thus no significant price hike for this segment. From the consumer's point of view, the biggest advantage of GST would be in terms of reduction in overall tax burden on goods. Services, depending on their nature, have been placed under four tax rates of 5 per cent, 12 per cent, 18 per cent and 28 per cent.Service Tax for many services like insurance and telecom will increase from 15 percent to 18 percent, making many services costlier. However, the impact will not be so strong so as to change what services the common man buys, feel experts.
Meanwhile, it is raining sales on consumer electronics and home appliances to clear stocks before the GST kicks in on July 1. Gold, consumer durables, cigarettes, mobile phone bills will cost more under GST while movie tickets will cost a little less.
Economy-class air travel will be taxed at 5 per cent against the present 6 per cent. However, business class air tickets will be costlier attracting 12 per cent tax against the present 9 per cent. A.C and first-class train travel will remain more or less the same after GST, as the service tax levied will increase from 4.5 per cent to 5 per cent. Non-AC travel will remain exempted from tax. Air-conditioned restaurants will attract GST at 18 per cent on food bill. Non-AC restaurants will attract a 12 per cent GST.Education and healthcare have been exempted from GST.
In the opinion of many like Anand Gupta, owner of the 'Anandam' restaurants and of 'Gupta Sweets and Namkeen', the apprehensions that business owners have regarding GST are due to lack of knowledge about this taxation system or it is those who have been conducting their businesses in shady ways so far. "There will be teething problems when such a huge change is executed, and there will be some initial inconveniences to business owners, however, we need to rise above personal interests and welcome a step that will do good to our country. GST is an important milestone in India's transition to transparency and efficiency for a stronger democracy. Dehradun's traders' associations have been organizing GST awareness workshops and having learnt from one of these, I support this new taxation system wholeheartedly. Both business owners and consumers will benefit from the removal of cascading tax effect after the implementation of GST," he told The Pioneer.