As GST approaches, focus shifts to prices, processes

Rate of levy for 1,211 items finalised; it may deliver benefits for those purchasing new apartments

With the Goods and Services Tax (GST) regime poised to become a reality, after years of uncertainty, the focus has shifted to the impact it will have on prices, people and processes.

From a stage where the only question was when is it likely to materialise, it has reached a point where the rate of levy for 1,211 items has been finalised. There is clarity now with regard to a multitude of products and the tax they will attract, from essential foodgrain to luxury items like cars.

The GST is expected to come into force from July 1, thus subsuming a number of Central and State levies, including excise duty, service tax, Central sales tax, VAT, entry tax, luxury tax, entertainment tax and octroi.

With many loose ends remaining, the possibility of the date being deferred is always there, says S. Thirumalai, indirect tax advocate and former president of FTAPCCI. A categorical statement from the government declaring that “we are ready” to go ahead is what will set the course.

There, however, is clarity enough to assess the impact on the prices on various goods and services in the proposed regime that revolves around the concept of a single point taxation. Under the GST, there will be four tax slabs -- 5%, 12%, 18% and 28%. And there will also be exempted items.

Fresh fruits and vegetables, eggs, fresh meat, bread, milk, curd, butter milk and newspapers figure in the list of items on which no tax will be levied. Coffee, tea, spices, medicine, coal, skimmed milk power are among the items that will attract a 5% levy. Coming under the 18% tax slab will be mineral water, cameras, pastas, jams, sauces, ice creams and many more. Figuring in the 28% slab are washing machines, vaccum cleaners, automobiles, chewing gum, shampoo, paints, shaving cream and deodarants among others. Apart from exempting a host of food products from the levy and making travel by cab aggregator services such as Uber and Ola cheaper, the upcoming GST regime could deliver benefits for those purchasing new apartments upto certain sizes. Families, however, will have to shell out more on children enrolling for management courses in private institutions with the rate of levy fixed at 18% as opposed to the existing 15%. Entertainment and hospitality figure in the list of sectors where consumers need to pay more for several services.

The GST, which is expected to bring within its fold several small manufacturing units, commercial establishments and traders, could lead to changes in the distribution system and possibly temporary disruption in supplies, including in pharmaceutical industry. Hinting at such a scenario, Dr. Reddy’s Laboratories CFO Saumen Chakraborty said the disruption in pharmacueticals could be particularly in stocking and invoicing from one node to another.

Girish Bhat, Managing Director of Medihauxe Pharma Pvt Ltd, a major distributor of life-saving medicine, said GST would turn the spotlight on the various issues and practices in the trade. Noting that confusion prevails, he added the new regime is likely to see many in the distribution chain exiting the business. He, however, did not expect supplies of medicines to get affected.

Telangana State Federation of Chambers of Commerce and Trade President Prakash Ammanabolu underscores the need for the government to not be severe on those committing mistakes until the traders get familiar with GST.