3rd November 2016 was the date on which GST Council finalized the GST rates.
The GST council zeroed upon the much awaited GST Slab rates as follows-
- Lowest Slab @5% – Food items and other mass essentials.
- Standard Slab @ 12% – Substantial Goods & Services.
- Middle Slab @ 18% – Rest Of Goods & Services.
- Highest Slab @28% – Luxury & Demerit goods.
It must be noted that the States have consented for levy of additional Cess on luxury and demerit goods. The levy of Additional Cess is aimed to create a pool for funding compensation to States for a period of 5 years.
Also. The Additional Cess to be imposed on luxury and demerit goods such as luxury cars, alcohol, tobacco, aerated drinks, pan masala etc.
However the GST Council could not finalize on the GST rate on Precious metals like Gold.
Zero Rate - zero rate on 50% of items under CPI index basket and includes food grain. However, these zero rate items cannot be treated at par of exempted goods. Zero rate will also be levied on exported goods.
Also, food items will most5 likely continue to be given special treatment and will be exempted.
Major Distortions which need to be avoided –
Before the major two day meeting of 3rd and 4th November 2016, it was promised that all cesses / surcharges will be subsumed in GST. However, yesterday’s meeting proposed a new levy in the form of CESS will be imposed to meet the likely revenue loss of states. That cess is proposed to be the difference between present rate and GST rate, i.e., the differential. Sounds like Old wine in a new bottle!
Also, the stand taken by State Governments to retain taxing powers has in no way led to unified single tax. CGST, IGST and SGST will administered by different Government, changing nothing majorly from the existing system as we presently pay VAT, CST, Excise and Service Tax etc.
With the proposed Cess, there will continue to be distortion in tax structure and input credit with one more accounting head, one more tax, complicated payments, returns and distorted Cenvat Credit ! Instead of a separate Cess, the purpose of unified tax regime would have been served by adding the rate of Cess to the tax structure.
As an assurance, Honourable Finance Minister has assured that inflation will be under control.
Otherwise, it still seems a bumpy ride!
CAclubindia
