Four-tier GST rates ensure transparency, will aid in growth of biz: Experts

Healthcare and educational services are exempted from the purview of the GST

In a move which is expected to bring prices down from the current levels, the Goods and Services Tax (GST) Council on Friday decided on a four-slab tax rate for services along with the novel concept of input credit for goods used.

The Council concluded its two-day meeting here with the decision to apply the same four tax rate slabs for services as for goods, exempting, however, healthcare and educational services from the purview of the GST.

However, no consensus could be reached on the rate to apply on gold as well as on beedi, and the Council will meet again on June 3 in New Delhi for a decision in this regard.

Here are a few reactions from industry experts:

Aditi Nayar, Principal Economist, ICRA Limited: "With the effective tax rate intended to be brought down on most items, as well as a large portion of the CPI basket being kept in the exempted category, there is likely to be a limited impact of the GST on goods inflation. Although the standard rate for services has been kept at 18%, availability of input tax credit going forward, may soften the impact of GST on services inflation. The structure of rates that has been revealed appears to cushion any inflation risk, while posing some concern regarding the revenue buoyancy for the central government, given that state governments revenues' would be protected through the compensation mechanism.  

"While inflation risks related to the GST and the monsoon outlook appear to have shrunk relative to the earlier assessment, the MPC of the RBI may nevertheless choose to wait for greater certainty on such factors, before cutting rates or reversing the stance back to accommodative from neutral. However, the tone of the upcoming policy review is expected to be decidedly less hawkish than the April 2017 policy document and minutes."

Sunil Wadhwa, CEO, Groupe SEB India: “ For Small Domestic Appliances at 28%, I see consumer prices increasing. Because, 28% is the top rate if one adds full VAT and excise duty. However, a large percentage of appliances are made in excise-free zones. At present, we have no clarity on how the present excise exemption will work, post GST. In addition, there are going to be multiple costs associated with old stocks, compliances and increased cash flow requirements.

“Small domestic appliances such as electric irons, mixer grinders, juicers and air coolers should not have been equated with white goods like refrigerators and air conditioners. The government should use this opportunity to rationalise rates rather than simply going ahead with mechanical grouping. Proposed 28% GST on small domestic appliances is one of the highest in the world and certainly the highest among countries of our size."

Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP: “The long wait by the industry has been concluded with the GST Council having announced the rates of goods and services in its latest meeting on May 18-19.  Given the stated intention of the Government of not allowing a long lead time to the companies post announcing the rates, this development strongly indicates that Government is serious about meeting the July 1 deadline for the GST implementation date

"During the GST Council meeting held in Srinagar this week, the Finance Minister has announced that States are vigorously working towards the July 1 deadline for the much awaited nation-wide roll-out of GST.  Despite the contrary statements being made by the West Bengal Finance Minister in this regard, based on various developments on rates and rules in this GST Council Meeting, the Government appears to be more ready than ever to achieve the July 1 deadline 

"Based on the press conference by the Finance Minister, transportation services are being proposed to be taxed at 5 percent under GST, much to the delight of the transportation services sector and various e-commerce operators engaged in providing a platform for transportation services.

"The GST Council has made its intention to tax luxury services at a higher rate quite evident by announcing different rates for services such as hotels, five-star restaurants, etc based on their tariffs and other factors which distinguish luxury services from non-luxury services.  Hotels and five-star restaurants services with tariffs more than INR 5000/-, gambling, admission to cinemas and racing events have been kept at the highest rate being 28 percent.  There is still no clarity on whether such services would also attract levy of an additional compensation cess.  The Council has proposed a graded tax rate structure for other restaurants with small restaurants being taxed at 5 percent, other non-AC restaurants being taxed at 12 percent and AC restaurants being taxed at 18 percent.  

"With certain areas pending for decision by the GST council after conclusion of today’s meeting held in Srinagar, the next meeting of the Council has been scheduled to be held in New Delhi on June 3.  Some the key areas which would be discussed on June 3 would include GST rates for bio-diesel, biri and cigarettes, footwear, textiles, agricultural implements and gold.”

Erich Nesselhauf, Managing Director and CEO, Daimler India Commercial Vehicles: “Having the all-new GARC testing facilities close to our own modern plant test track in Oragadam is a welcome advantage: thanks to its larger layout, GARC can offer us additional testing scenarios that are complementary to our own. Overall, this investment under NATRiP is definitely strengthening India and Tamil Nadu as an automotive manufacturing location."

Divyesh Lapsiwala, Indirect Tax Partner, EY India: ““Life Insurance could have been considered as one of the sectors with a benign GST rate given the demographic situation in India and below average penetration of life insurance services.”