GST schedule for goods released to let businesses brace for July rollout
Under the new goods and services tax, dairy products will not be taxed but mobile phones will be taxed at 12%, cigarettes and cars at the highest tax rate of 28% plus cess
Srinagar: Dairy products like milk and natural honey will not be taxed but cellphones will be taxed at 12% and cigarettes and cars will attract the highest tax rate of 28% plus cess under the proposed goods and services tax (GST) regime kicking in from 1 July, according to the detailed list of tax rates released late on Thursday evening by the federal indirect tax body, the GST Council.
Making the schedule of aligning all goods in the five slabs of taxation—5%, 12%, 18%, 28% and 28% plus cess—on the same day of the Council taking the decision gives clarity to businesses, aiding their transition to the new unified indirect tax system that eliminates entry barriers and will help create a single national market.
Businesses have about 40 days to brace for the transition with full clarity on the tax rates. Most large companies have already put in place software systems for GST.
The GST Council will decide on placing various services in either of the 12% or 18% rate on Friday. It will also try to arrive at a consensus on a few items such as biris, gold jewellery and footwear that are of relevance to specific states.
The Council specified that the list of fitting goods into various tax slabs might undergo some changes, giving a window to stakeholders to quickly get their concerns addressed before the transition. “The Council has broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods... it will be subject to further vetting during which the list may undergo some changes,” said the chapter-wise GST schedule for goods uploaded on the website of the Central Board of Excise and Customs (CBEC).
As per the schedule, primary food items like eggs, dairy produce, meat and most fish varieties which are not frozen attract no GST. Frozen or processed fish will attract 5%, while frozen meat will be taxed at 12%. Butter will be taxed at 12%, while condensed milk will get taxed at 18%. Watches of different classification are placed in the 18% and 28% slabs, while medical instruments will bear a tax of 5% to 28% depending on the classification and mass use nature. Contact lenses will be taxed at 12%.
Since indirect taxes apply to the rich as well as the poor alike, unlike income tax, the incidence of which on an individual progresses with income levels, the effort is to keep mass use and essential commodities at the nil or the lowest GST slab.
The CBEC also uploaded the list of items falling in the highest slab of 28% which will also attract a cess. These items currently bear the highest incidence of central excise duty and state-level value added tax (VAT) because of their luxury or sin good status. In a revenue neutral transition to the GST, the tax incidence on them in excess of 28% GST is classified as a cess and will go to the corpus for compensating states for their revenue loss in the shift to GST.
In this segment, in addition to the 28% GST rate, pan masala will attract a 60% cess, aerated water and lemonade a 12% cess and unmanufactured tobacco 71%. Cigarettes will attract 5% cess and a specific duty ranging from Rs1,591 to Rs2,876 per thousand sticks depending on their length and on whether a filter is attached.
Large cars with a capacity to carry 10-13 persons, sports utility vehicles that are more than 4 metres long and have an engine capacity of more than 1,500 cc, as well as mid-segment hybrid cars with engine capacity less than 1,500 cc will bear a 15% cess over and above the 28% GST rate. In the case of small petrol cars up to 1,200 cc and diesel cars up to 1,500 cc, the cess is 1%. Aircraft for personal use and yachts used for pleasure or sports will bear a 3% cess.