Much Awaited part of GST is released: It's now time for business to evaluate their business according to these GST tax rate

Much Awaited part of GST is released: GST tax rate for Goods & Services are announced

From list of 1211 items, GST tax rate for 1205 goods is released & it looks that it’s time for the businesses to evaluate their cut over planning and formulate their pricing strategies in view of the transition to GST.

Overall the announcement has been positive & looks well thought of, by putting commonly used products under 5, 12 or 18% slab which in existing scenario was up to 22-24%. For ex: Products like Hair oil, toothpaste, soaps were charged at 22-24% rate which has been reduced to 18%.

We have tried to share as under 2 areas of key importance regarding GST tax rate for goods & services :

A ) What is in the list of item wise tax rates for us?

  1.  Milk and curd will continue to be exempt from taxation in GST too.
  2.  Mithai or sweets will attract 5 per cent levy.
  3.  Daily-use items like sugar, tea, coffee (barring instant coffee) and edible oil will attract the lowest tax rate of 5 per cent, almost the same as current incidence.
  4. Prices of wheat and rice, will come down as they will be exempt from GST if not packed in container & not branded too.
  5. Aerated drinks like Coke, Pepsi, 7 up, Mazza etc.and cars will be in the 28 per cent bracket.
  6. All the category of cars whether small, mid size or large will attract common rate of 28% but cess will vary in each category. Small size will have 1 per cent cess, mid-sized cars will attract 3 per cent and luxury cars 15 per cent.
  7. Aerated drink will have cess of 12% over & tax rate of 28%.
  8. White goods like ACs and refrigerators will fall in the 28 per cent tax slab.
  9. Motor Cycles with > 350 cc  engine shall also pay cess of 3 % over the tax rate of 28%.
  10. Life-saving drugs have been kept at 5 per cent rate.

In the overall basket, it looks that item wise tax rate has been reduced in GST for majority of items.

The list of exemptions in GST has been substantially trimmed as compared to the existing regime, with only 7% of total items indicated to be kept nil-rated.

This will broaden the tax base & also some new sectors have been introduced to tax compliance.

B) Which Goods are exempt under GST?

  1. Live Animals other than live horses.
  2. Meat and edible meat offal, except the one’s frozen & kept in unit container.
  3. Fish, crustaceans, molluscs & other aquatic invertebrates. These are all Aquatic species.
  4. Dairy produce excluding flavored milk ; bird’s eggs; natural honey; edible products of animal origin, not elsewhere specified
  5.  Products of animal origin, not elsewhere specified or included
  6. Live trees and other plants
  7. Fresh Edible vegetables, roots and tuber, except the frozen & container ones.
  8. Fresh Edible fruit and nuts; peel of citrus fruit or melons, except the frozen & container ones.
  9. Coffee, tea & spices of seed quality , not roasted & processed
  10. Cereals, other than the ones contained in a container & bearing a registered trade name
  11. Products of milling industry; malt; starches; inulin; wheat gluten,  other than the ones contained in a container & bearing a registered trade name.
  12. Vegetable plaiting materials like betel leaves; vegetable products, not elsewhere specified or included
  13. Sugar and sugar confectionery, gur (jaggery)
  14. Preparations of cereals, flour, starch or milk; pastry cooks’ products
  15. Miscellaneous edible preparations, like prasadam supplied by religious places
  16. Beverages, spirit and vinegar, other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized water sold in sealed container, alcohol.
  17. Residues and waste from the food industries; prepared animal fodder.
  18. Salt; sulphur; earths and stone; plastering materials, lime and cement.
  19. Pharmaceutical products i.e. human blood & it’s component , All type of contraceptives.
  20. Fertilisers: Organic manure, other than put up in unit containers and bearing a brand name.
  21. Essential oils and resinoids like kumkum, bindi, alta.
  22. Miscellaneous chemical products: Municipal waste, sewage sludge, clinical waste.
  23. Plastics and articles thereof
  24. Rubber and articles thereof
  25. Fire Wood and articles of wood, wood charcoal used for fuel.
  26. Paper and paperboard; articles of paper pulp, of paper or of paperboard: Judicial, Nonjudicial stamp papers, Court fee stamps when sold by the Government Treasuries or Vendors authorized by the Government, Postal items, like envelope, Post card etc., sold by Government
  27. Printed books, newspapers, pictures and other products of the printing industry, manuscripts, typescripts and plans.
  28. Ceramic products: Earthen pot & clay lamps
  29. Glass and glassware: Bangles (except those made from precious metals)
  30. Tools, implements, cutlery, spoons and forks of base metal; parts thereof of base metal: Agricultural implements manually operated or animal driven.
  31. Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof: Hand loom
  32. Aircraft; spacecraft and parts thereof: Spacecraft (including satellites) and suborbital and spacecraft launch vehicles
  33. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof: Hearing aids
  34. Musical instruments; parts and accessories of such articles: Indigenous handmade musical instruments
  35. Project imports, laboratory chemicals, passengers’ baggage, personal importation, ship stores: Passenger baggage.

Conclusion:

Therefore this is essential for the businesses, so they can evaluate. Accordingly undertake cut over planning and formulate their pricing strategies in view of the transition to GST.

Recommended References:

Item wise rates under 98 categories

GST Service wise tax rates

Services where only Service Recipient will pay tax

Tax rates for Dairy, Consumables & FMCG Products

Written By

Bhawana Joshi

Chartered Accountant, GST Consultant

About us: I am the co-founder of GST Insights. Our consultancy & solutions are focused on GST, based on industry requirements. To know more refer http://www.gst-insights.com

GST: Cost of Compliance is worth spending by SME’s & MSME’s to move towards an organized tax regime

It is estimated that there are about 65 lakh assessees of VAT, 26 lakh assessess under service tax and about 5 lakh central excise assessee . Most of them have started the compliance requirement for migrating to GST but there are still 30-40% which are yet to get migrated to the GST. Amongst those who have not started the migration to GST are mostly SME’s & MSME’s.

SMEs and MSMES will feel more heat because many of these small and medium-sized players either have not obtained registration in existing regime as “passing off the law” or if they have obtained registration there is no order or formal recording of correct stock details in books.

Now under GST we believe that such dealers who were passing off the law have to seek registration because GST has so clearly fixed the laws by making rules very separate & not integrated. However for availing the credits they have integrated the rules.

So one should brace for de-stocking as the deadline inches closer, Though intermittent and temporary in nature, there will be disruption for sure. It is expected to begin from the business to business (B2B) segment and trickle down to the business to consumer segment (B2C).

Therefore we believe GST is giving an opportunity for all level of businesses to participate in your own growth of business & on top of that growth of nation too with recorded numbers, which in current regime were in disguise.

References

https://taxmantra.com/only-34-percent-service-tax-assessee-have-migrated-to-gst-till-now/

http://www.livemint.com/Money/pEModEvRAhI2KSet0kguiN/Gear-up-for-supply-chain-disruption-after-GST-implementation.html

Stock Transfer in GST to branches & it’s impact on SMB Business

Impact on Working Capital due to Taxation on Stock Transfer for branches

Stock Transfer in GST is a Boon or Bane? This question appears because it has both the legs & we believe that it has boon’s superceding banes. Here is our analysis.

In Current Scenario

  1. In the current regime Stock transfer to the branches was allowed without any VAT tax payment, based on issuance of stock transfer form known as “Form F” issued by the recipient to the source branch. The purpose of the form was that the transfer is not sale. Hence later at the time of sale of such goods there was taxability where CST was a cost & leading to cascading impact.
  2. Usually stock transfers are movement of goodsto another unit of branch. These are done without any consideration but the complexity arises at which value the tax should be paid. Under excise the excise duty was paid on the cost of manufacturing the goods & no VAT due to no tax on stock transfer.

In GST Scenario

  1. In the GST regime stock transfer is essentially free as there will be no additional cost of CST because of tax credit allowed in any state movement. However the only challenge for business would be of working capital required in excess of the tax liability that arises at the time of stock transfer to branches which has to be paid at the time of transfer & the Input tax credit of the same will be allowed only once stock gets liquidated. Therefore we believe the only challenge here for business is to arrange for ADITIONAL WORKING CAPITAL REQUIREMENT at the time of stock transfer.
  2. In GST, transaction value is broadly considered as the value on which GST is levied. However in case of stock transfer to branches there will be no consideration & accordingly no transation value. Therefore the challenge which is needs clarity in GST is that at what value tax should be paid on Stock Transfer to branches.

Conclusion

Though stock transfers are taxable under GST, the tax is fully allowed as credit. This will eradicate the cascading effect which exists under current regime and as a result, products will be more cost effective. Although this is bound to create crunch in effective working capital, effective planning of branches can reduce the impact on working capital. Therefore such provisions are prompting business to think logically & plan there branches based on demand.

Reference

http://www.cbec.gov.in/htdocs-cbec/gst/index

http://www.gst-insights.com