Goods and Services Tax (GST) rate cut

In a bid to rationalise the tax rates the Goods and Services Tax (GST) Council reduced the tax rates on more than 50 items, including sanitary pads, and white goods like washing machines, refrigerators and kitchen appliances.

GST rate cut

In a women-friendly and progressive move Sanitary pads earlier having 12 per cent tax rate are completely exempts from the GST, footwear of value up to 1,000 Rupee will be taken at 5 per cent, earlier this slab was reserved for footwear up to a value of 500 Rupee.

Hotel industry also got some relief from the council, the rate of tax on the accommodation service would be now calculated on the basis of the transaction value and not the declared tariff.

Returns filing process is also relieved for assesses with an annual income of less than 5 crore, comprising 90 per cent of GST filers, they can now file their returns on a quarterly basis. Two simplified forms named Sahaj and Sugam are also released for the large filers.

Does it solve the problem ?
A women friendly move to completely exempts the Sanitary pads from the GST is a positive move of the GST Council in rationalising the tax rates, but the items being exempt from GST are already not eligible for input tax credits. So, while the output tax has been slashed, the input tax burden on companies making these pads has increased.

The reduced tax rates on daily use items will release burden on common people, it is anticipated that the decreased prices around 5-7 per cent will attract more sale and hence the overall tax revenue from these products would remain largely unaffected.

But it is highly possible that the demand will not increase; because the while items included in the list are like refrigerator, washing machine etc, people will not buy more than their need even if the price is decreased substantially.

Way ahead ?
Government has reduced the tax rates largely on items including in 28 per cent slab, a welcome step because this could lead to wipe out this slab all together, hence simplified GST, the council should now think about the issue of including petroleum products in GST.