19th July 2017
19 July 2017
Musings..........
The GST code
Like you all I have been from the position of a public layman been intrigued by the sudden commotion on GST. When a minister from the ruling party could not expand the GST then I guess I can be pardoned for I'm no Arun Jaitley, the finance minister of the NDA or even a P Chidambaram for that matter. So I set myself in the time I got to crack the GST code. Hope it will help someone if not myself.......
To get to an introduction on the Goods and Services Tax, it is a significant step in the field of indirect tax reforms in India. This is a single tax system for the whole country. The entire chain from the manufacturer to the consumer will be covered in this tax. Only value addition will be taxed and the burden of tax is to be borne by the final consumer.
The benefits of GST portrayed are that it will curb corruption in taxation by being online system and with one uniform tax system there will be no shadow pricing.
So who will monitor this- the centre will monitor the CGST and the states/UTs will monitor the SGST/UTGST.
The CGST and SGST would be levied simultaneously on every transaction of supply of goods and services, except the exempted lot that are outside the purview of GST or transactions which are below the prescribed threshold limit.
While the location of the supplier and the recipient within the country is immaterial for CGST, the SGST would be chargeable only when the supplier and the recipient are located within the state.
The dealer would be required to deposit the CGST component into the Central Government account while the SGST portion into the account of the concerned state government. But, the dealer need not pay the tax in full as he would be entitled to set off this liability against the CGST and SGST paid on his purchases ( say raw materials ).
However, for paying the CGST component, the company would be allowed to use only credit of CGST paid on its purchase while for SGST, it can utilise the credit of SGST alone.
Nearly 81% of items are in the 18% slab or below, while the remaining 19% are taxed at 28%.
Lets take a field by field analysis of GST and its impact-
CONSUMER GOODS
Broadly, the tax slabs seems lower on majority of FMCG( fast moving consumer goods) like soap, shampoo, packaged foods etc. but then it is unclear exactly how much the companies will pass on the benefits to the consumers and while tax are less on some products it has increased for some so the monthly outgo may remain unchanged.
LUXURY ITEMS
On the one side, the gold and jewellery items hav become dearer ( costlier) while there is relief for luxury cars, audio systems, TVs, refrigerators and mobile phones.
ONLINE SHOPPING SECTOR
GST may bring even bigger discounts and flash sales as it will standardise e-commerce pricing.
REAL ESTATE
The provision of input tax credit for the real estate sector is set to drive price reductions across the spectrum. The construction sector will fall under 12% slab and can reduce construction costs.
AUTOMOBILES
Dramatic reduction in taxation and retail prices are likely ensuring high growth in this sector and beneficial to the consumer.
BANKING
Consumer will have to pay more for credit card payments and ATM transactions.
GLOBAL TRADE
GST exists in almost 160 countries and while global case studies are there, Indian size makes it impossible to draw comparisons.
It's been proven though that GST is inflationary.
HOSPITALITY
While consumers who chose modest services are not affected, in the luxurious restaurants and five star hotels, the consumer will have to cash out more.
The mid market hotel segment will grow and show boom.
ENTERTAINMENT
Drama, theatre, Indian classical dance, and circus will attract 18% GST , while sporting events like IPL, casinos, race, film festivals, cinemas and amusement parks will avail 28% tax.
Tickets less than or equal to RS 100 attract 18% tax.
TELECOM
The telecom sector will have to pay additional 3% tax with the shift to GST. The input tax credit will offset margin squeeze for telecos.
Now I guess there is some clarity into the enigma that is GST. For the folks reading this who are as confused as before or even more I guess you will have to find it out the hard way then.
Politically, I guess it's a win-win situation for Narendra Modi. Another election promise fulfilled, another UPA scheme nicely adapted, another feather in the cap.
How much changes this will bring in the socio-economic landscape of India is yet to to seen and how the common layman( me included ) will be affected is yet to be experienced.
Whether the gamble paid off, well we will have to wait for 2019 for that.
Food for Thought.........
RC
Musings..........
The GST code
Like you all I have been from the position of a public layman been intrigued by the sudden commotion on GST. When a minister from the ruling party could not expand the GST then I guess I can be pardoned for I'm no Arun Jaitley, the finance minister of the NDA or even a P Chidambaram for that matter. So I set myself in the time I got to crack the GST code. Hope it will help someone if not myself.......
To get to an introduction on the Goods and Services Tax, it is a significant step in the field of indirect tax reforms in India. This is a single tax system for the whole country. The entire chain from the manufacturer to the consumer will be covered in this tax. Only value addition will be taxed and the burden of tax is to be borne by the final consumer.
The benefits of GST portrayed are that it will curb corruption in taxation by being online system and with one uniform tax system there will be no shadow pricing.
So who will monitor this- the centre will monitor the CGST and the states/UTs will monitor the SGST/UTGST.
The CGST and SGST would be levied simultaneously on every transaction of supply of goods and services, except the exempted lot that are outside the purview of GST or transactions which are below the prescribed threshold limit.
While the location of the supplier and the recipient within the country is immaterial for CGST, the SGST would be chargeable only when the supplier and the recipient are located within the state.
The dealer would be required to deposit the CGST component into the Central Government account while the SGST portion into the account of the concerned state government. But, the dealer need not pay the tax in full as he would be entitled to set off this liability against the CGST and SGST paid on his purchases ( say raw materials ).
However, for paying the CGST component, the company would be allowed to use only credit of CGST paid on its purchase while for SGST, it can utilise the credit of SGST alone.
Nearly 81% of items are in the 18% slab or below, while the remaining 19% are taxed at 28%.
Lets take a field by field analysis of GST and its impact-
CONSUMER GOODS
Broadly, the tax slabs seems lower on majority of FMCG( fast moving consumer goods) like soap, shampoo, packaged foods etc. but then it is unclear exactly how much the companies will pass on the benefits to the consumers and while tax are less on some products it has increased for some so the monthly outgo may remain unchanged.
LUXURY ITEMS
On the one side, the gold and jewellery items hav become dearer ( costlier) while there is relief for luxury cars, audio systems, TVs, refrigerators and mobile phones.
ONLINE SHOPPING SECTOR
GST may bring even bigger discounts and flash sales as it will standardise e-commerce pricing.
REAL ESTATE
The provision of input tax credit for the real estate sector is set to drive price reductions across the spectrum. The construction sector will fall under 12% slab and can reduce construction costs.
AUTOMOBILES
Dramatic reduction in taxation and retail prices are likely ensuring high growth in this sector and beneficial to the consumer.
BANKING
Consumer will have to pay more for credit card payments and ATM transactions.
GLOBAL TRADE
GST exists in almost 160 countries and while global case studies are there, Indian size makes it impossible to draw comparisons.
It's been proven though that GST is inflationary.
HOSPITALITY
While consumers who chose modest services are not affected, in the luxurious restaurants and five star hotels, the consumer will have to cash out more.
The mid market hotel segment will grow and show boom.
ENTERTAINMENT
Drama, theatre, Indian classical dance, and circus will attract 18% GST , while sporting events like IPL, casinos, race, film festivals, cinemas and amusement parks will avail 28% tax.
Tickets less than or equal to RS 100 attract 18% tax.
TELECOM
The telecom sector will have to pay additional 3% tax with the shift to GST. The input tax credit will offset margin squeeze for telecos.
Now I guess there is some clarity into the enigma that is GST. For the folks reading this who are as confused as before or even more I guess you will have to find it out the hard way then.
Politically, I guess it's a win-win situation for Narendra Modi. Another election promise fulfilled, another UPA scheme nicely adapted, another feather in the cap.
How much changes this will bring in the socio-economic landscape of India is yet to to seen and how the common layman( me included ) will be affected is yet to be experienced.
Whether the gamble paid off, well we will have to wait for 2019 for that.
Food for Thought.........
RC
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