New rates of Goods and Services Tax (GST) declared by GST Council on Thursday will increase incidence on the consumer of services, says Punjab Haryana Delhi Chambers of Commerce. The increase is likely to be around 20 percent says Bimal Jain, the Chairman of Indirect Taxes Committee of the organization.
Speaking to Firspost, he said, “Service tax in India is 66 percent of the country’s GDP. Hence it can easily be understood that 20 percent hike in GDP is going to affect a huge section.”
He further added that as per the Minister of Finance's statement, taxes on services have been increased from 15 percent to 18 percent, which amounts to 20 percent increase.
There are 96 services on which service tax is imposed. The increase in taxes on services which are likely to impact common man are mobile phone services, internet café, beauty parlor, ATM operations mange ment services, cable operator, life insurance, cab operation, outdoor catering, transport of goods by air and road, transport of goods by pipeline, air travel agent and airport services, dry cleaning, general insurance, internet telephony services.
Jain lauded the effort of the GST Council led by Finance Minister Arun Jaitely to keep a big number of food items in the tax exempt category and commodities of mass consumption in the bracket of tax as low as 5 percent.
“More than 50 percent of the commodities in the CPI basket are not going to be taxed. That is a good news for consumers,” he says. He further added that prices of goods of mass consumption are not going to increase, since only 5 percent tax is fixed on them.
On the other hand prices of luxury cars may go up as GST on this product is decided to be 28 percent instead of present 15 percent VAT.
He says that some of the white goods may also be included in the 28 percent tax bracket along with luxury and demerit goods, as per the Chief Economic Advisor Arvind Subramaniam’s statement made on Thursday.
“It is not mentioned as to which of the white goods will fall in this tax bracket. But prices of television, refrigerator, air conditioners, which are also white goods may substantially increase,” he adds.
He says that if the above said goods are included in the 28 percent tax bracket, it will affect the middle class strata of the society.
Jain said that prices of demerit goods such as tobacco products, pan masala and luxury goods are likely to fall under 28 percent tax bracket.
The GST Council yesterday announced a four tier taxes on goods and services. The rates of taxes of commodities which do not fall in the Consumer Price Index basket will be 5 percent , 12 percent, 18 percent and 28 percent.
A list of commodities which will be taxed under 12 percent and 18 percent bracket is yet to come.
Bimal Jain expects that the rates of taxes will not be increased from the present rates.
“Let us assume that a manufacturer pays 11 percent tax on his commodity. He will expect that his produce finds place in the list of commodities that fall in the 12 percent bracket or a bracket lower than that. I think this expectation should be met to contain price rise,”he said.
GST Council also decided to impose cess on tobacco made products, luxury goods and aerated drinks.
“But the trader will not get credit of paying cess in the new regime. This will decrease the ease of doing business. So the government should introduce system to provide credit of paying cess,” he said.