Moneycontrol
May 20, 2017 03:54 PM IST | Source: Moneycontrol.com

GST takes shape: Modi Sarkar tells companies that profiteering will be dealt with strictly

The finance minister Arun Jaitley-headed GST Council has decided to place services under four slabs—5, 12, 18 and 28 percent— compared to the current uniform 15 percent levy on all eligible services

The Modi government sent out a strong message on Friday asking companies to pass on the benefits of lower tax incidence to the consumers, as they would now gain from an input tax credit (ITC) system.

For instance, the Goods and Services Tax (GST) rate on mobile services would be 18 percent from the existing 15 percent. However, this may not necessarily mean that the bills will go up, Revenue Secretary Hasmukh Adhia told reporters on the sidelines of the GST Council meeting in Srinagar.

“Changing the headline rate and having it in the bill doesn’t mean that the tax burden has gone up...If they are getting the benefit of the lower cost they will have to pass it down to consumers. As per the anti-profiteering law, because they will be getting ITC, the benefit that we (government) are giving to them that has to be passed on to the customers,” he said.

In a case of a telecom service provider, the benefit can be passed on to customers through a change in tariffs, he explained.

Input credit means at the time of paying tax on output, a producer, trader or service provider can reduce the tax already paid on inputs.

Adhia further said that the industry should not raise prices of goods and services in anticipation of a change in tax rates post the rollout of GST from July 1.

“Let us try to pass down the actual tax rate (benefit from receiving input tax credit) to consumers. We will try to operationalise the machinery for anti-profiteering. The machinery can ask any big company to ask its costing and balance and ask them why did you increase 3 percent in the last 3 months only? Those questions can be asked any time,” Adhia said.

Read Moneycontrol's full coverage on GST here

The finance minister Arun Jaitley-headed GST Council has decided to place services under four slabs—5, 12, 18 and 28 percent— compared to the current uniform 15 percent levy on all eligible services.

The current exemptions on services such as healthcare and education will continue, and the overall impact on service costs after GST will be non-inflationary, Jaitley said.

Lottery is the only services whose rate remained a debatable one and will be discussed when the Council meets on June 3 in New Delhi.

Adhia also said that there will no service tax for travelling in an economy class in Indian railways.

For air-conditioned trains, including first class, two tier and three tier, service tax will be 5 percent, with ITC on services.

In addition, metro and local trains will also be exempted from paying service tax.

Decoding: What does GST mean for you?

Similarly, service charge for travelling in a business class in an airline will be 12 percent, while that of an economy class will be 5 percent.

On Thursday, the Council fixed rates for thousands of goods, placing these in four slabs—5, 12, 18 and 28 percent.

An officers’ panel over the last six weeks had been working towards the fitment or classification exercise – an exhaustive list specifying the tax rate of goods and services, which was presented at the Council meeting.

The fitment panel has been working on the principle to fix tax rates closest to the present incidence of taxation on good or services.

The final rates have been fixed in a way such that the impact on inflation as well as revenue to the government is near neutral.

The two-day GST Council meet began today in Srinagar, as ministers and officials from 29 states and union territories, along with Jaitley and senior finance ministry officials converged in the Jammu and Kashmir capital to decide and fix rates on a long list of goods and services.

The GST billed as India’s most ambitious reforms move, will stitch together a common national market, dismantle fiscal barriers among states and consolidate a patchwork of local and central duties into a single levy.

 
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