Even after fixing rates much remains to be done by the gst council

Even after fixing rates much remains to be done by the gst council

It is welcome that the GST Council has finalised the rates of the new tax for most goods and services. They must quickly finalise the rest and publish them, along with the rules, to enable companies to prepare their accounting systems to roll out the new tax at the earliest. The government must be prepared to tweak the rates and procedures, depending on how things work out as the tax is implemented.
While most rates on goods and services are fine, some are not. A 5 per cent levy on newsprint will hurt the vital newspaper industry. The 18 per cent GST on financial services and 28 per cent on detergents are excessive. Financial services should come under the Integrated GST to ease compliance. The 1 per cent tax at source that ecommerce is obliged to collect is a needless burden on the fledgling industry and consumers.
India’s final goods and services tax design has four rates for goods and services, plus cesses, but excludes petroleum, electricity, real estate (except in the case of brave Jammu and Kashmir) and alcohol. It was logical to fix the rates — 5 per cent, 12 per cent, 18 per cent and 28 per cent — on services in sync with goods. That most goods and services will attract the standard 18 per cent GST is welcome. The sale of, say, a car would attract the same rate as leasing a car, and this makes sense. The exempt goods include primary produce such as cereals and milk. However, status quo has been maintained on most exempt services that include education and healthcare.
The case to expand the net and minimise exemptions is compelling, given that services contribute to a lion’s share of the economy, but service tax revenues now account for just 1.6 per cent of GDP.
The same rate of tax on all goods under a six-digit harmonised system of nomenclature (HSN) code will reduce category confusion and disputes. All cars, for example, will attract 28 per cent rate, with a varying cess component that would not be eligible for input tax credit.
This will keep the GST chain unbroken and allow manufacturers to claim credit paid on the taxes used to make the final product. Similarly, a lower rate for goods transport is in order as fuel has been excluded from GST.