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GST Regime proposed 70% of all goods and some consumer goods to become cheaper

GST Regime proposed 70% of all goods and some consumer goods to become cheaper

The majority of goods such as cosmetics, soap, toothpaste, shampoo, plastic and various consumer goods may become cheaper under the proposed GST regime. It is likely that most of the items will be subject to the rate of 18% in spite of the higher one of 28%.

Effective Tax rates to be computed:

As told by one of the government officials, the government is likely to rely on the currently applicable effective tax rate on a commodity. This way they will get a fix for finalizing GST slabs. As a result, it is expected that majority of the goods will now fall under lower tax bracket.

The majority of goods will come under 18% tax slab:

Let’s take an instance to understand this. If an item at present comes within the slab of 12% as per excise. Let’s assume the said item receives an abatement on same and 8% excise duty is charged on it. In such scenario for fitting the GST rates, the government will consider effective tax rate rather than the actual tax rate. If we go by this concept, then the majority of goods will lie under the category of 18%.

 GST Council to meet on May 18-19 to take a final call:

As of now, the GST council has finalized four tax slabs for GST i.e. 5%, 12%, 18%, and 28%. Also, they have kept a possibility for pegging highest tax rate up to 40%. A committee of officials has been designated especially for working on GST rates fitment and finally the council will take a call on this at its next meeting which is scheduled to take place on May 18-19, 2017.

Government trying to avoid price shocks:

The government is trying every possible way out to avoid price shocks in the GST switchover scenario. The GST rate fitment will follow the same principle. The GST legislation provides for the anti-profiteering clause to make sure that industry gives tax benefits to the ultimate consumers by lowering prices wherever possible.

GST would not add up the tax burden:

One can hope that most of the consumer goods which majorly includes FMCG (fast moving consumer goods) and other consumer durables would be subjected to 18% tax rate. Although, in present day effective excise duty works out to be somewhere around 8-9% and when adding standard VAT rate of 13% on this, the effective tax burden comes out to be 21-22%. As of now, it can be concluded that if not adding up the tax burden, GST in turn would lower the prices for consumers.

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