GST Current Affairs

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GST Council Finalises 4-slab Service Tax Structure

The GST Council headed by finance Minister Arun Jaitley has finalised a 4-slab service tax structure at the rates of 5, 12, 18 and 28 per cent as against the single rate of 15% levied on all taxable services. GST regime is scheduled to be implemented from July 1. In the next GST Council meeting, tax rates on gold and other precious metals will be taken up for discussion.

Salient Highlights

Luxury hotels, gambling, race club betting and cinema services will attract a tax rate of 28%.

Education, healthcare and non-AC rail travel will remain exempted from the GST tax regime. However, the states will be given the option to levy additional taxes on cinema to compensate for the revenue losses entailed due to merging of entertainment tax with GST. At present, the total tax incidence on cinema including entertainment and service tax is in the range of 55%. The states need to use the legislative route if it wants to levy additional tax on cinema.

States will also be permitted to levy any new tax as the taxation powers of the states have only been restricted and not abolished after the rollout of GST.

Telecom and financial services will be taxed at a rate of 18%.

Transport services will be taxed at the rate of 5%. Cab aggregators like Ola and Uber will have to pay 5% under GST in place of 6%. AC rail travel will attract 5% tax. Economy class air travel will attract 5 % GST while business class will attract 12%. Travelling on metro, local train and religious travel such as Haj Yatra would be exempted from GST.

The e-commerce players like Flipkart and Snapdeal would be required to shell out 1% Tax Collected at Source (TCS).

Non-AC restaurants and AC restaurants will attract a GST of 12% and 18% respectively.

Advertisements published in newspapers will attract 5% GST. At present it is exempt from service tax.

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GST Council Announces GST Rates

The GST Council headed by finance Minister Arun Jaitley has finalised tax rates and has approved all the seven rules for the GST regime that is scheduled to be implemented from July 1. The remaining two rules of the GST pertaining to transition and return is under the examination of the legal committee. In total, the council has fixed the rates of 1211 items. It will decide rates of some other items and services in the coming days.

Salient Highlights

  • Out of 1211 items, 81% of the items will attract tax of 18% or less. Only the remaining 19% of items will attract a highest rate of 28%
  • Household items like Sugar, Tea, Coffee and edible oil will attract 5% levy. Cereals and milk will be exempted from the tax.
  • Manufactured goods will attract 18% levy.
  • Luxury cars will attract 28% GST in addition to a cess of 15%. Small petrol cars will attract 28% GST plus a 1% cess, and diesel cars will be taxed at  28% plus 3% cess.
  • Capital goods, a key asset for the manufacturing sector, will be taxed at 28%.
  • Aerated drinks will fall under the 28% tax bracket.

Significance

The GST Council has not increased the overall tax in any of the 1211 items but have reduced tax on many items. For example, Soap, which is now taxed at the rate of 22-24%, will be taxed at 18%.

The present tax incidence in excess of 28% on luxury items will be treated as cess and will be deposited in the corpus for compensating states if they suffer any revenue loss. 

Food items are expected to become cheaper. Daily use items like hair oil, toothpaste, and soap are kept in the 18% tax slab instead of 28%.

The cost of energy generation is expected to become less as tax incidence on coal has been reduced from 11% to 5%.

GST regime is expected to unify the whole of the country into a common market eliminating both Central and State levies. Also, GST is expected to increase state and federal tax revenues, ease inflation and boost economic growth by 1-2% points in the medium term.

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President Gives Assent to Four GST Legislations

President Pranab Mukherjee has given assent to four supporting legislations on Goods and Services Tax (GST).  The four legislations are:

  • The Central GST Act, 2017,
  • The Integrated GST Act, 2017,
  • The GST (Compensation to States) Act, 2017, and
  • The Union Territory GST Act, 2017.

The above bills were passed in Rajya Sabha on April 6th and in Lok Sabha on 29 March. Now with the President’s assent, these bills will pave way for the roll-out of GST regime from 1 July.

The Central Goods and Services Tax Act, 2017, deals with the levy of the Central Goods and Services Tax by the union government over the supply of goods and services within the boundary of a state.

The Integrated GST Act, 2017, provides for the levy of Integrated Goods and Services Tax by the union government on the interstate supply of goods and services.

The Goods and Services Tax (Compensation to States) Act, 2017, provides for compensation for the losses incurred by the states on account of implementation of the Goods and Services Tax.

The Union Territory GST Act, 2017, provides for the levy and collection of tax on intra-state supply of goods, services or both, by the Union Territories.

Jammu & Kashmir

GST regime will not be applicable to Jammu and Kashmir because of the fact that Article 370 gives special status to the state. So, the state will have to legislate its own law and integrate with the GST regime.

GST

Goods and Services Tax is a comprehensive indirect tax which is to be levied on the manufacture, sale and consumption of goods and services in India. This is so far the biggest tax reform in the country. GST will subsume central excise, service tax, Value Added Tax (VAT) and other local levies to create a uniform market. GST eliminates the cascading effect of taxes because it is taxed at every point of business and the input credit is available in the value chain.

The tax rates under GST regime will be based on the recommendation GST Council. Council has two-thirds voting by States and one-third by Centre.

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