seema
GST approaching to completion, here are the effects of the landmark bills
seema tyagi 6 Apr 2017

GST approaching to completion, here are the effects of the landmark bills

With all the major hurdles associated to the GST (Goods and Services Tax) over,  Finance Minister Arun Jaitley and BJP look forward to full support from all the political parties as the GST bill goes to the Rajya Sabha on Wednesday.

The 4 supplementary GST (Goods and Services Tax) Legislations are - Central GST Bill, 2017; the GST (Compensation to States) Bill, 2017; the Union Territory GST Bill, 2017 & the Integrated GST Bill, 2017.

It can be predictable that the government will thrive in its goal of implementing GST from July 1. While Congress and TMC are very likely to move amendments in the upper house to block its passage, it will not affect make much difference to the soft passage of the GST bill. Seniors members of the BJP have issued a whip, asking all party members to remain present for the next two days in the House.

The bill is approaching its implementation after initial dealings were started in August 2016. After the bill passes, the issue of cascading taxes major in the country is set to be relaxed.

GST will consider central excise, service tax, VAT and other local levies to create a uniform market. GST is likely to boost GDP growth by about 2 per cent and check tax evasion. 

1. See how the GST Bill course will affect you:

Q: How will customer advantage from the GST roll-out?

With the execution of GST, customers will not be subjected to double taxation. All taxes that are levied while purchasing good will include both the central government’s taxes as well as the state government’s taxes. The move would put off state governments from haphazardly increasing taxes fearing public backlash.

Q: How economic impact will it have?

GST can heighten economic growth by as much as 2 percentage points, according to Finance Minister Arun Jaitley. Greater tax fulfillment has the potential to enhance revenues for the government, serving narrow Asia's widest budget deficit and allowing more funds to be allocated to schools and highways.

Q: What is the tax rate?

The GST Council has finalised a four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent, with lesser rates for necessary items and the maximum for luxury and de-merits goods, counting luxury cars, SUVs and tobacco products, that would also attract an extra cess. Furthermore, with a view to keeping inflation under check, essential items including food, which presently constitute roughly half of the customer inflation basket, will be taxed at zero rate. The cess is probable to provide additional resources to the central government to compensate states for losses incurred. This will be based on the compensation formula.

 Q: Why didn't India's founders put into practice a national sales tax?

The constitution laid out the method of taxation in 1950, soon after several so-called princely states -- territories ruled by a inhabitant ruler under the British Emperor -- agreed to join the power of India. Different levels of economic development and local sensitivities necessitated a two-tier system at the time.

 Q: Are all goods and services covered under the GST?

Some state have been pushing to exempt chief revenue-generating products such as alcohol, petroleum and real estate. Tax on certain luxuries -- such as a flat-screen TV, for example -- may see a far higher rate than food staples.

Q: How will the GST affect companies?

Companies will have to revamp their accounting systems, which may involve one-time investment costs. There may also be disorder in the short term as the government gets the computer software up and running. The tech "backbone" is at a "fairly advanced stage," Jaitley told NDTV on Wednesday.

Q: Will the GST affect inflation?

Prepare for a short-term spike in prices. Citigroup Inc.'s economists say countries like Canada, Australia and New Zealand saw a one-time increase in inflation after GST implementation, which normalized in a year. Modi's advisers say the impact on India's consumer prices will be negligible if the GST rate is capped at 18 percent

 Q: What sectors will benefit?

Logistics companies stand to gain as it becomes easier to ferry goods across India. Other sectors largely depend on the fine print of the GST, including exemptions.

 

2. What will cost more and what will cost less after the implementation?

  • These services are likely to become more costly

A commoner should, at least till the time the service industries do not pass on the benefit of amplified credits, budget for some increased pocket pricking on some necessary services like mobile bills, renewal premium for life insurance policies, banking and investment management services.

Similarly, some basic luxuries for a common man like WIFI and DTH services, online booking of tickets may become costlier as well.

  • Prices of these necessary services also likely to rise

Also, in the backdrop of quite a bit of current exemptions subsiding, various necessary services may cost an arm and a leg under the GST regime. For example, where the current exemptions are discontinued, residential rent, health care, school fees for children, courier services, commuting by metro or rail may become expensive.

  • Services that may get cheaper in most states

With entertainment taxes getting subsumed in GST, prices of movie tickets and theatrical performances may become cheaper in most states.

Dining in restaurants may also become more pocket friendly in most states.

  • Essential goods, certain vehicle categories likely to be cheaper

In terms of goods, where an exemption/ lower rate is prescribed for essential goods, GST is expected to marginally better the house economics as a whole. Further, two-wheelers, entry-level sedan (except small cars), SUVs and luxury or premium cars may become cheaper under the GST regime, depending on the current supply chain arrangement and state of operation.

  • Marginal impact on white goods

Again depending on the current supply chain structure and related indirect taxes, a commoner could expect a 2% to 3% plus or minus impact on white goods like televisions, washing machines, stoves, etc.

  • Aerated drinks , sin goods prices likely to jump

The Government aligned with its negative outlook to deleterious goods, proposes a higher tax on 'sin goods' which essentially includes aerated drinks, cigarettes and tobacco products. Where a higher rate of around 40% is proposed on aerated drinks, the same may witness an increase in their prices.

  • Afirmative blow on cost of most supplies in long term expected

While the above anticipations are mostly basis the information released/ statements of government officials available in the public domain, we would need to await the final structure released by the Government on classification and related rates for various goods or services. Nonetheless, with enabling of anti-profiteering and other corrective measures, GST should result in a decreased cost for most supplies to the end consumer in the long run. 

(With the help of TimesNow)

 

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