Industry voices concern over GST rate complexity, cess uncertainity

November 04, 2016 01:44 am | Updated December 02, 2016 01:16 pm IST - NEW DELHI:

Kolkata,                              Date: 23/08/2016.
Naushad Forbes, President of Confederation of Indian Industry is at a media conference in Kolkata on Tuesday.
Photo: Ashoke Chakrabarty

Kolkata, Date: 23/08/2016.
Naushad Forbes, President of Confederation of Indian Industry is at a media conference in Kolkata on Tuesday.
Photo: Ashoke Chakrabarty

Industry bodies and business leaders have expressed their concerns about the complexity of the final rate structure of the Goods and Services Tax as announced by Finance Minister Arun Jaitley.

The main issues of concern seem to be the complexity brought on by the multiple rates of 5 per cent, 12 per cent, 18 per cent, and 28 per cent, and the uncertainty about the additional cess that will be levied on luxury goods and tobacco products.

“While the goods will have a multiple rate structure, no clarity is provided on rates applicable to services,” Prashant Deshpande, Partner at Deloitte Haskins & Sells LLP said. “Hopefully there will be a single rate structure.”

Gold rates

The uncertainty on rates for gold is not warranted as gold is a key determinant of the rate structure, Mr. Deshpande added.

The Confederation of Indian Industry (CII) stated the importance of the bulk of goods and services falling within the standard rate of 18 per cent and a higher rate of 28 per cent must be an exception.

“The cess needs to be levied only at the final product and total tax including cess on demerit goods should be kept within the present overall indirect tax incidence.”

Industry also voiced some functional problems regarding the time it will take to comply with the new tax rules.

“We hope sufficient time is given to companies to comply with the tax after the rules are finalised and made public and that the levy of cess would not lead to inflationary pressures,” G.P. Hinduja, Global Co-Chairman of the Hinduja Group said.

The consensus among experts, however, is that since the rates have been finalised, the government must move quickly to classify which goods fall under which rate.

“The rate of 28 per cent was a surprise,” Anita Rastogi, Partner - Indirect Tax, PwC India said.

“The levy of cess could have been avoided as it is a clear distortion to the GST scheme. Now the next step is the classification of goods under each of the tax rate.”

Another area of concern is the requirement for multiple registrations in each state for the supply of goods and services. “This has the potential to result in huge burden of complexity as companies operate in many different states,” said Naushad Forbes, President of CII.

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