India, slowly but slowly, is coming to grips with the new indirect tax regime, i.e. Goods and Services Tax (GST), launched on July 1, 2017. Everyone from the business enterprises to the end consumers wanted GST. But nobody had an idea of its complexity and so, the GST created a flutter before and after the launch.

The GST Tax Rate, which still remains a bone of contention, is levied at 5%, 12%, 18% and 28%. Recognizing the difficulties faced due to the uniform tax system, the GST Council has held a series of meetings and decided to rejig the rates of products and services to make it a tax-friendly affair. Let’s see how now fares for both GST on common man and the business community.

As Many as 177 Items Moved out of the Highest GST Tax Slab of 28%

Just 2 months ago in November 2017, the GST Council took a major step by removing 177 items sitting in the 28% tax slab to a level lower of 18%. These items include beauty products, chocolates, shaving cream, aftershave kits, handmade furniture, granite, marble, chewing gum, among others.

Ignite the Gourmet in You as Eating Outside Becomes Cheaper

Don’t cut on your food menu outside as the government has eased the rates of both AC and non-AC restaurants to 5% each. Earlier, the GST Tax Rate was 18% and 12%, respectively, for these restaurants. However, there won’t be any input tax credit for the restaurant owners to avail. Outdoor catering and restaurants located within the hotel premises having tariffs of ₹7,500 and above, however, would come under 18% GST Tax Slab.

GST Composition Scheme - The Game Changer for Small Traders, Manufacturers

Yes, the GST has emerged as a single indirect tax in India. But with a 4-tier GST Tax Rate mechanism, things may not be that rosy for small business enterprises having a limited turnover. Taking a note of the same, the council has eased the taxation burden on enterprises with a turnover of below ₹1.5 crore by bringing them under the ambit of GST Composition Scheme. Goods traders & manufacturers will have a total tax liability of 1% with Central GST (CGST) and State GST (SGST) constituting 0.5% each to the overall levy. Non-alcohol serving restaurants would need to pay CGST and SGST of 2.5% each, keeping their overall tax liability to 5%. The downside, however, is the removal of input tax credit clause from the composition scheme.

Apart from that, a business enterprise must meet several conditions to avail the benefits of the composition scheme. Traders and manufacturers are restrained from supplying the goods from one state to another. In addition, dealers can’t supply goods exempted from the GST levy. It is possible that an enterprise can deal in several businesses like wires & cables, textiles, FMCG and others under the same PAN, the concerned organization then needs to register all that under the scheme or face an exit from the same.

Cess Hike on Cars Keep Tax Rates at Pre-GST Level

The GST council has hiked the cess on mid, large and sports utility vehicles (SUVs) to take the total tax incidence to 45%, 48% and 50%, respectively. The cess hike has been 2%, 5% and 7%, respectively, for cars shown in the order above. With the hike, the tax rates have come to the level which was applicable before the launch of the GST.

Loans to be Slightly Expensive

Year-on-year, banks and non-banking finance companies (NBFCs) receive tons of retail, corporate and other loan applications. The incidence of GST has fallen on to the processing fee and other charges pertaining to a loan. The 15% service tax has made way to 18% GST, making loans a slightly expensive affair. It’s still within the reach of the borrowers. If a processing fee plus service tax of the past was coming to ₹11,500, the same would now rise slightly to ₹11,800 with the GST in place.

The GST, in many ways, has changed the dynamics of taxation in India. While some are able to decode it well, others are taking time to understand the new-age concept. With time, the doubts will only clear to ensure both businesses and consumers embrace the new indirect tax regime with much fanfare. 

Published by Jack Louis