GST slabs can be reduced to three from five but will take time: Sushil Modi

Slabs under Goods and Services Tax (GST) can be reduced to three from five at present for the convenience of consumers and businesses though it will take some time, Bihar Deputy Chief Minister Sushil Kumar Modi.

Narendra Modi also heads high level minister panel on GST.

In an interview to PTI Bhasha, Modi said that there are five slabs in GST and "there is an intention to reduce it to three slabs but it will take some time" as it is related to states' revenue.

Reacting to questions raised by former finance minister P Chidambaram that why rates of 88 items were not reduced by GST council in 2017, Modi said: "This is not a decision where only BJP government is involved. The decision has been taken by GST Council in which congress led governments are also involved".

He said that after implementation of GST, initially it was to ensure that there should be no revenue loss and then rate on many items were gradually reduced with stabilisation of revenue

GST on gold: Buying and making jewellery to get expensive for customers

The Goods and Service Tax (GST) Council has been kind enough to provide a special 3 per cent  GST to gems and jewellery sector ( the exception being rough diamonds at 0.25 per cent).

Going by the economic survey of India and the hype which was created in the run-up to this meeting, a much higher rate was feared. However, the rate of GST for jewellery is in line with what it was under the old tax regime.

GST has increased paperwork and lot of compliance. Only time will tell if we as a country or an industry are ready for it.

The immediate impact would be on the investment buying of gold by consumers as the resale value will be down by three per cent. Here' an example:

Mr A bought gold worth   Rs 100

Paid GST                                Rs     3
                                                —————
Total cost                                Rs 103

Now, after 6 months he wants to sell this gold and presuming that the gold price remains constant, he will get Rs 100 and the GST amount would be lost at the consumer level.

The transaction impact cost has increased from about one per cent to three per cent.

From the government's point of view, this is in line with their thinking/ planning — don’t invest in physical gold, rather invest in gold sovereign bonds. The consumer will also be better of as there is an interest coupon attached to bonds and it tracks local gold prices.

The exchange business of old jewellery for new ones will also be affected as the cost of 3 per cent will affect the transaction.

Another area which will affect the industry and the consumer is making of gold jewellery out of gold/scrap supplied by the customer. At present, there was no tax impact on the making of jewellery. Labour or making charges of jewellery were exempt from service tax (similar exemption was also under excise rules ). Under GST no such exemptions exist and making charges will be subject to 18 per cent GST.  This is an undesired result.

Export from domestic tariff area (other than SEZ ) will be hit on two counts:

One, there is no exemption from GST for gold procured for export purposes. This would mean a higher blockage of working capital.

Second, the export business will also be harmed. It depends on raw material (gold ) being supplied by oversea buyers and the Indian party makes the jewellery and exports i.e. value addition in the form of design and labour.

Under GST regime, the overseas customer will have to register as a non-resident business person and undertake the required paperwork. This will deter many customers.

Bullion imports system may be disturbed/altered as most international suppliers (including bullion banks)  sending goods on consignment to India will have to register as a non-resident business. This requirement may deter many players operating in India.

The diamond segment, particularly in the home state of Gujarat, had a total exemption from indirect tax. Value-added tax was zero in Gujarat and there is no excise on diamonds.
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Worried about GST rates? Know what gets cheaper and costlier from July 1

The Goods and Services Tax (GST) rehime is set to be rolled out from July 1, more than 11 years after a formal process to introduce it began. The GST Council on Thursday fixed rates for 1,211 items. In the second half of the Council meet, on Friday, rates of services and products like beedi, cigarettes, tobacco, footwear, gold, textile, handloom, handicraft, agricultural equipment and biscuits, will be discussed.

It appears from the first set of announced rates that consumers can rest assured most of the items will become cheaper (for now) as the new rates will be lower than the current effective levies.

Mobiles phones, however, might get costlier, with the government imposing a 12% GST, taking away the benefit under duty differential that was being offered to local manufacturers. So, under the new GST rate, while imported phones will become cheaper, most locally manufactured ones will get costlier.

Foodgrains will cost less as the GST Council decided to exempt the daily-use commodities from the levy.

GST promises to stitch together a common national market by replacing a string of central and local levies such as excise, value added tax, octroi, service tax.

What will get cheaper?

"Categorisation of several consumer products like soaps, toothpaste and hair oil under 18 per cent is good news and should see price drop for consumers," said Pratik Jain, leader, indirect tax, PwC to Economics Times. "Similarly, several food items such as edible oil, tea, coffee, sugar, etc, have been kept at 5 per cent , with exemption for milk and foodgrain, which would also cheer industry."

Branded goods: Tax rates on branded goods have been slashed to 18 per cent. Currently, the effective tax rate for the three items is pegged at 23-24 percent.

Hotels: Staying at hotels post the implementation of GST will become cheaper as they are currently taxed at 22% and a posed to be under the 18% tax bracket.

Restaurants which will come down to 18% from 22% tax slab.

Foodgrains will cost less

Processed food items that draw tax rates of 15% will be taxed at 5% under GST.

Under services, entertainment services will be brought down from 22% to 18% under GST.

Soap which are currently taxed at 28% will be taxed at 18% under GST. Similarly toothpaste will come down from 22-24% current tax rate to 18%.

Personal hair products - hair oil will become cheaper as it will drop 10% from 28% current tax rate to 18% under GST.

Entry level cars, two-wheelers, paint, cement, electrical items, consumer durables are expected to get cheaper.
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