EDITOR’S DESK
NO DENYING THE FACT :
THE GST : THE BIGGEST REFORM EVER UNDERTAKEN
The Indian government should be given a
standing ovation for undertaking a very complex
task of Goods & Service Tax (GST), an essential
reform which the previous governments talked
vociferously but could not dare to materialize it
into a law. The country is now finally ready to
ride on this major reform on July 1, 2017. The
GST Council, the apex decision making body on
GST has in its 2-day meeting held at Srinagar on
18 th and 19 th May 2017, decided tax rates on
nearly 6000 items of goods and services. Many
daily-use items were either exempted or were
levied lower tax rates. Items like milk, fruit and
vegetables, gur or jaggery, food grains and
cereals have been exempted from tax while
items such as sugar, tea, coffee, edible oil and
sweets have been placed in lowest tax slab of
5%.
Tax incidence on none of the commodities will go
up and in fact there will be reduction on many
items as tax on tax will be a thing of past now. In
case of some goods tax has been brought down
deliberately. A number of items that faced 30-
31% tax now have been placed in the 28% and
18% slabs. Nearly 81% of the goods will attract
tax equal to or lower than 18%.
FITMENT & HARMONIZED SYSTEM OF
NOMENCLATURE
Under the Harmonized System of Nomenclature
(HSN) a globally standardized system of names
and numbers to classify traded products have
been assigned four digit codes. Of the 1211 items
7% have been exempted, 14% to attract 5% tax,
17% will face 12% tax, 43% will face 18% and
19% to face 28%. The overall tax burden on the
average household will decline after the
implementation of GST.
2
All chemicals and intermediate goods will be in
18% slab.
FITMENT OF SERVICES
The GST council in its 2 nd day meeting on 19 th May
decided on the fitment of services in tax slabs.
Like rates on goods, services were also decided
in five categories for tax slabs of 0%, 5%, 12%,
18% and 28%. Education and health services
were kept tax free. Most of the services including
AC Class Train Ticket, Air Travel, Hotel,
Restaurant, Phone, Insurance, Cinema, Racing
and Bating etc. will be costly under the new
regime ranging from 5% to 28%.
However, the Council could not decide on tax
slabs for six items of goods category like gold,
textiles, bio-diesal, bidis, footwear, packaged
cereals & biscuits. These will now be decided in
its meeting on 3 rd June, 2017 in New Delhi.
Electricity has been kept out of GST.
CUSTOMS AND LOCAL TAXES NOT IN
THE GST AMBIT
GST is a tax based on consumption. Now Value
addition on production to consumption will be
taxed and input credit will be given on tax
already paid on earlier stages. The Centre and
State will share 50% each of the tax slab. Thus if
a commodity is taxed at 18%, it will be shared
9% each by the Centre and State.
GST will absorb all central and state taxes.
Centre's taxes are central excise, additional
excise duty, CVD, SAD, Service tax, and cess for
Krishi Kalyan. State taxes are VAT, Central sales
tax, Lottery Tax, Surcharges and cess. However,
custom duty and taxes of local bodies will not be
subsumed into GST.
Cont. Page No. 14
Economic Challenger// ISSN 0975-1351/ July-September. 2017