The Union Budget 2017, led by Finance Minister Arun Jaitley, is unique and historic in many ways and it is often a highly polarizing debate with pundits from various schools of thought expressing multiple opinions. The Government has finally announced the rates for the much-awaited Goods and Services Tax (GST). GST will have a 4-tier structure with rates ranging from 5% to 28%. It seems like a win-win for the consumers in most cases.
5%, 12%, 18%, 28% Tax Slabs on every items: Keeping inflation in mind, the Government has decided that items such as food grains, poultry, milk, fresh meat, curd, fish, flour, bread, cereals, salt, printed books, handloom items etc should not be taxed. So, the GST rate will be zero for these items. Note that almost half of the items in the Consumer Price Index fall in this category.
Commonly used items or daily essentials
Commonly used items or daily essentials such as tea and coffee, will be taxed at just about 5%. This bracket also includes medicines, kerosene and frozen vegetables among others. Services such as air and rail transport will also be placed under the 5% bracket.
Items that will come under the 12% tax bracket will include cheese, Ayurvedic medicines, mobile phones, frozen meat products, sewing machines, butter etc.
The majority of items, however, will fall under the 18% tax slab. This will be applicable to items like mineral water, ice cream, cameras, note books, pastries, telecom services, steel products, refined sugar, financial services and more.
Luxury items such as personal aircraft or yachts, motorbikes, automobiles etc will attract the highest tax rate of 28%. This is in addition to items such as hair shampoo, washing machines, vacuum cleaners, dishwashers, refrigerators, air conditioners, vending machines, deodorants and more. 5 star hotels and movie theaters too will come under the 28% tax slab. To be precise, 14 percent of items are under the 5 percent slab, 17 percent under the 12 percent, 43 percent under the 18 percent and 1 percent under the 28 percent bracket.
Set to get more inexpensive in certain segments
Good news is that services are set to get more inexpensive in certain segments, while education and healthcare are exempted from tax. However, a decision regarding the tax rates to be levied on cigarettes, gold and other items has been deferred to the 3rd of June.
Encouragement towards digital payment: The government has already announced incentives for those making payments through digital mediums like debit/credit cards, mobile wallets etc. Service tax on payments for transactions upto Rs. 2000 through debit/credit cards have been removed, 0.75% discount has been announced for digital payments at petrol stations. Further no cash transaction above 3L to be allowed. With a vision to move towards a cashless economy, the government may announce further measures to encourage digital payments.
DigiGaon intiative
DigiGaon intiative will be launched to provide tele-medicine, education & skills through Digital Technology. Digital Platforms like UPI would account for digital transactions worth of Rs. 2,500 crores according to the government’s target
It is now clear that the shift to new tax regime won’t be a burden to common man if things go as planned. He doesn’t need to shell out more to feed his family. In fact, as mentioned earlier, there is a cost reduction in majority items.
Price for the radical change
Despite the fact that GST is a major reform step for the economy and a game changer, the concern was that the common man will have to pay a price for the radical change. In turn, this would have impacted companies too hitting their sales. But, under the new rate structure, companies can pass on the GST benefit to the end-consumer. This is something the industry has promised.
