GST Rule Changes: What to Expect

Since 2017, the Goods and Services Tax (GST) has been adopted as the unified indirect tax levied on transactions, replacing erstwhile indirect taxation systems like the Value Added Tax (VAT). For inter-state transactions, GST has CGST and IGST components, while for intra-state transactions, it has the SGST and CGST components. Rates of GST vary for individuals as opposed to corporations, and certain industries are even exempted from the purview of GST taxation. Overall, the GST tax categories have been designed to generate maximum revenue to ensure the good health of the state exchequer.

• GST has four main categories of taxation: 5%, 12%, 18% and 28%.
• Some products, like extra-neutral alcohol, may be taxed or exempted from tax based on the purpose of production.
• RBL and ICBC banks are to be added to the list of banks that are exempted from IGST.

GST has four categories—5%, 12%, 18% and 28%. However, you must bear in mind that these categories are for individuals. There are separate rates of interest for entities called composition taxable persons, who are taxed at 1.5%, 5% and 6%, depending on their turnover. Furthermore, the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) systems also function for these entities. They must pay the former at 2% and the latter at 1%.

Let us take a look at the category in which products are classified:

1. 0% - Daily essentials like milk, bread, jaggery, kohl, unbranded paneer, curd, children’s drawing books, educational services, etc., will not be taxed under any GST category.
2. 5% - Tea, packed or branded paneer, roasted coffee, footwear under Rs. 500, coir mats, spices, sweets, etc., will be taxed under this category.
3. 12% - Computers, processed food, umbrellas, almonds, mobile phones, packaged coconut water, chutney, ghee, etc., fall under this tax bracket.
4. 18% - Capital goods, printers, soup, pasta, corn, toothpaste, toiletries, hair oil, etc., will be taxed at this rate.
5. 28% - Small cars and high-end motorcycles from this category will also have an additional cess component in their price. Other products in this tax bracket are cigarettes, aerated drinks, air conditioners, etc.

A lot of goods and services will be exempted altogether, such as extra neutral spirits used in alcohol production (for human consumption), a range of services provided by railways to the common people, corporate guarantee for which ITC is available, etc.

A number of changes have been noted in GST with regard to goods and services.

Goods

• Millet flour to attract a 5% GST if it is sold pre-packaged.
• GST on molasses has been drastically reduced from 28% to 5%.
• Imitation zari has been taxed at 5% if it uses polyester or classified plastic as its raw material.
• Extra neutral alcohol manufactured as raw material for industrial processes will be imposed an 18% GST.

Services

• Water and public health services, along with related composite services.
• If converted to coastal run, the GST on foreign flags are also to be exempted from GST.
• GST is to be exempted if the services are rendered to the central, state, or UT governments.
• Bus operator companies using online ticketing to be exempted from CGST and eligible to make income tax reduction claims.

Recommendations

GST recommendations have also been put in place with regard to goods and services:

• Regularisation of issues regarding matters relating to raw cotton, trauma care and angioplasty, plates or cups that use areca leaves as their raw material, desiccated coconut, etc.
• RBL and ICBC banks are to be put on the list of banks that are exempted from IGST.
• Satellite launch services provided by ISRO and certain private entities are to be GST-exempted.
• Supply of food and beverages that are served in cinema halls as a part of cinema-viewing service or independently is to be brought under the purview of GST.

The GST council, on 23rd July, 2024, has decided that the goods and products imported to SEZ for company operations or by any authorised dealer to the SEZ will be exempted from GST retrospectively from July 2017. This decision could significantly boost operations and production in the SEZ, bringing a new lease of life to the economy.

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.