From July 1st, 2017, the GST bill will come into force. So, the Goods and Services Tax, which will bring the Indian economy under a single tax bracket, is said to reduce the delays in tax payments and ensure more stringent checks on the same.
It is the biggest tax reform since Independence, as per government notice, the main reason why there is change in our GST? because it is only meant to boost growth and scrap local taxes that add to overhead costs and obstruction in businesses. The making was started since 2000, and now in 2017 the Goods and Services Tax (GST) will finally come into force from July 1.
Foodgrains, cereals and vegetables have been zero rated under GST, other rate slabs are 5%, 12%, 18% and 28%. An assessed tax will also be added to certain sin and luxury products.
- Reduction in the rate of AUTOMOBILE : There is a reduction in the passenger car segment is also expected to see an overall reduction in tax outgo, with bigger cars and sport utility vehicles (SUV) benefiting from lower tax rates.
- A marginal tax relief in Cement : This really opposite to the peoples expectation of cement firms, which were hoping for an 18% GST rate, the sector has been categorized in the 28% slab. Despite that, cement makers will see some relief in tax payout as the effective tax rate for packaged cement is anyway 29-31%.
- CONSTRUCTION, REAL STATE: Input cost credit to offset higher rate : The sector is likely to gain from the input tax credit that is available under GST rules. As the construction sector, including real estate, has had an effective tax outgo of between 11% and 18%. Under GST, the entire works contract is charged 18% tax.
- CONSUMER GOODS: Anti-profiteering measures to keep a lid on gains : The sales growth will be hit in the near term as trade channels have cut purchases in the run-up to GST in Packaged consumer goods makers. Overall impact is seen as neutral as rates have been cut on mass consumption items and hiked on higher-end products.
- JEWELLERS, No dent to demand : The change will not affect the consumers buying.The GST rate on gold jewellery has been fixed at 3%, lower than expectations of a 5% rate. The new rate is close to the current 2%.
- Increase in the price of LUXURY HOTELS: After the implementation of GST , the tax rate varied between 18% and 25% based on state levies, GST classifies hotels into four buckets based on room tariffs. Those with room rates below Rs 1,000 will be tax-exempt, although the rest will be taxed at 5%, 12%, 18% and 28%.
- MULTIPLEXES on benefit side : The GST rate has been fixed at 28% for tickets costing over Rs 100. Multiplexes will be on benefit, primarily owing to input tax credit on fixed costs such as rent and common area maintenance.
- TELECOM: Hit by higher tax burden : All the Telecom companies were already facing the crisis by the weighed down by high taxes and levies, now it has been increased with an additional 3% tax with the shift to GST. A service tax of 15% applied to telecom services earlier.
- VALUE FASHION: Gets a leg-up : The 5% GST rate on apparel priced below Rs 1,000 is expected give a fillip to the value fashion business. Post GST, the entire value chain—raw material to the finished product—will come under the tax net.