NEW DELHI, June 30:
The landmark Goods and Services Tax will not alter the prices of essentials and daily use items like salt and soaps as they have either been exempt or tax on them has been kept at the current level.
Unbranded food staples including vegetables, milk, eggs and flour will be exempt from GST along with health and education services.
Tea, edible oils, sugar, textiles and baby formula will attract only 5 per cent tax.
These essential and daily use items make up for about 80 per cent of the goods used. Luxury items including motorcycles, perfume and shampoo, which account for about 19 per cent of all taxable items, will be taxed at 18 per cent or higher.
GST, the biggest tax reform since Independence, will unify 16 different Central and State taxes like excise, service tax and VAT, to create a uniform rate of tax across the country from midnight tonight.
The Tax department has been working overtime to inform people about GST, Revenue Secretary Hasmukh Adhia said, adding that the new regime “will bring in transparency, help cut tax evasion and benefit honest taxpayers”.
Earlier, traders with turnover of above Rs 10 lakh were paying VAT at full rate, but they were exempt from excise. But now, a trader with turnover of Rs 20-75 lakh will have to pay 2.5 per cent tax. Businesses with turnover of Rs 20 lakh will be exempt.
“For small businesses, we have composition scheme. It is very simple,” Adhia said.
Under the composition scheme where the turnover does not exceed Rs 75 lakh, manufacturers will have to pay 1 per cent of turnover as GST, traders – 2.5 per cent and 0.5 per cent of turnover in state in case of other suppliers.
CBEC in advertisements said single tax GST will bring down prices for most household. “GST a boon for households. 81 per cent of items to fall below or in 18 per cent GST slab,” it said.
Butter, ghee, almonds, fruit juice, mobiles and umbrella have been placed in 12 per cent tax bracket while 18 per cent rate would be levied on hair oil, toothpaste, soap, ice cream, and printers.
The highest tax of 28 per cent will be levied on chewing gum, chocolates, custard powder and waffles containing chocolate. Besides, cars, aerated drinks, AC, refrigerators and capital goods and all industrial intermediaries will attract the highest rate.
The new tax regime, to be effective midnight tonight, will replaces the messy mix of more than a dozen state and central levies built up over seven decades, with a one national GST unifying the country’s USD 2 trillion economy with 1.3 billion people into a common market.
GST will require businesses to file their returns online, for which the company providing the IT backbone GST Network has been working on the modalities.
The returns are to be uploaded once a month by retailers following which the return form are to be matched for availing input credit and thereafter the computer will generate the tax liability.
“Today Income Tax returns are also filed online, so nothing is impossible, it is easy,” Adhia said.
The rail passengers will have to pay a little more to travel AC and first class.
Service tax on AC ticket charges will be hiked from 4.5 per cent to 5 per cent, an increase of 0.5 per cent, after the GST implementation.
Similarly, GST on transport of goods by rail will be 5 per cent in place of service tax of 4.5 per cent levied earlier with exemption for essential goods like milk and agriculture produce.
Service tax is levied only on AC and first class fares in the Railways. So if a ticket costs Rs 2,000, then a passenger will have to shell out Rs 2,010 from July 1.
However, a passenger will not have to pay if in case tickets were booked in advance for journey to commence on or after July 1.
The GST difference of fare shall not be collected on the tickets booked in advance as the GST shall be applicable on tickets issued on or after July, 2017, said a senior Railway Ministry official.
In case of Rajdhani, Shatabdi, and Duronto trains where catering charges are included in the fare, the charges of catering component will get modified as per the new GST from July 1.
Exemptions have been granted from the levy of GST in respect of passengers travelling in second class, metro, sleeper class, transportation by rail of agricultural produce, relief materials, milk, salt, food grain including flours, pulses and rice, railway equipment and materials, and defence and military equipments.
Consumers will have to shell out more for banking services, insurance premium payments and credit card bills with the GST rollout.
Banks and insurance companies have been already sending messages and mails to their customers about the new tax rates which would be charged.
“Dear policyholder, revision of service tax on account of GST will come to effect from July 1, 2017,” said a Life Insurance Corporation of India (LIC) message.
Punjab National Bank (PNB) informed its customers that “with effect from July 1, 2017, the existing service tax of 15 per cent levied on all the banking services will be replaced by a GST of 18 per cent.”
Common banking services that would attract higher service tax include debit card, fund transfer, ATM withdrawal beyond the number of free services, home loan processing fee, locker rentals, issuance of cheque books/drafts/duplicate passbooks, collection of bills, collection of outstation cheques, cash handling charges and SMS alerts.
Besides, life and non-life premiums would see an increase from 15 per cent to 18 per cent.
Canara HSBC Oriental Bank of Commerce Life Insurance Company Chief Financial Officer Gaurav Seth said the premium amount on a term insurance policy will be 18 per cent from 15 per cent currently.
“In case of endowment policy, the first year premium is liable to be taxed at 4.50 per cent with effect from the mid- night today from existing 3.75 per cent and on subsequent year premium, it will rise by 0.38 per cent to 2.25 per cent,” Seth said.
Bank of Maharashtra CEO and MD Ravindra P Marathe said with GST will result in increased cost of almost all services offered to customers.
Mobile phone bills are expected to go up while recharges would yeild less talktime for prepaid customers from tomorrow under the new GST tax regime.
Under the GST, telecom services would be taxed at 18 per cent compared to 15 per cent currently.
This means that a user would get a talktime of about Rs 80 on a recharge of Rs 100, compared to about Rs 83 earlier.
Similarly, costs for postpaid users would also go up to the extent of three percentage points. So, for a monthly usage of Rs 1,000, users will have to pay Rs 1,180 instead of Rs 1,150 currently.
However, it remains to be seen whether telecom operators choose to absorb some impact of the increased tax levy (as they can claim input credit) or pass it on entirely to their customers.
Emails to telecom operators remained unanswered.
A number of retailers in the city remain clueless about the impact of the new tax regime on telecom services.
“It is only tomorrow once we start recharging for customers that we will get to know how much talktime the customer is getting. But going by simple calculation, it (talktime) is expected to be lesser,” said one of the shopkeepers in the bustling Connaught Place area.
He added that it will take a few days for the situation to normalise.
Many customers who walked in for recharges, too, seemed unaware of what the GST roll out would mean for prepaid services.
Telecom operators are already under intense pressure, inflicted by newcomer Reliance Jio’s competitive pricing. The industry had expected some relief from the GST Council in the form of a lower tax slab for telecom services.
However, the same was increased following which industry lobbyists made multiple representations stating that telecommunications is an essential service and should attract a lower tax rate of 5 per cent.
“Today it (industry) is saddled with an unprecedented debt of more than Rs 4.5 lakh crore, with revenues of less than Rs 2 lakh crore … We are hopeful that the Government will … Revise the current rate of 18 per cent, which is fairly high to the requested rate of 5 per cent,” Cellular Operators’ Association of India Director General, Rajan S Mathews said.
This rate of five per cent is better aligned to telecom as it is an essential service and critical infrastructure, he opined.
Fertiliser prices will come down marginally with GST rate being slashed to 5 per cent from 12 per cent proposed earlier, a decision taken in the interest of farmers, Union minister Ananth Kumar said today.
The reduced GST rate will bring down burden on farmers by Rs 1,261 crore, Chemicals and Fertilisers Minister Ananth Kumar told reporters here.
“Prices of urea, DAP, MoP, and mixed fertilisers will come down marginally with reduction in GST rate from 12 per cent to 5 per cent,” he said.
Kumar claimed that the reduced GST rate on fertilisers will help in bringing prosperity in rural areas.
“I feel the GST, which is going to be unfolded is focused on goan, garib and kisan. A new history been created again with GST rollout,” he added.
Post GST, the average weighted MRP will decrease to Rs 5,909 per tonne (or Rs 295.47/50 kg bag) as compared to the existing all-India weighted average of Rs 5,923 per tonne (or Rs 296.18 per 50 kg bag.
Under the GST regime, there will be a uniform MRP of Rs 295.47 per 50 kg bag across the country except few states where additional VAT is charged on natural gas. However, even in these states MRP will reduce by Rs 3 per 50 kg bag.
Similarly, the MRP of P&K fertilisers, for which the prices are not administered, are also expected to come down on an average basis as the incidence of tax will be lower than the existing tax.
The Government has asked the industry to pass on the benefits to farmers.
The GST Council today reduced the GST rate on fertilisers to 5 per cent from 12 per cent because of apprehensions of rate of crop nutrient going up.
At present, taxes on fertilisers are in the range of 0-6 per cent in different states.
Retail price of urea, which is fixed by the Government, is at Rs 5,360 per tonne now. The prices of DAP and potash, fixed by private companies, are at Rs 22,000 and Rs 11,000 per tonne, respectively. (PTI)
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