In a concrete move towards benefitting the economy, the centre and states have recently taken the first step by signing off on a four-tiered tax system i.e., 5%, 12% 18% and 28%. Here, the three slabs 5%, 12% and 18% have been targeted for the common man comprising of mass consumption items like spices and mustard oil (5%), processed foods (12%) and soaps, oil, toothpaste, refrigerator and smartphones (18%). The 28% slab will comprise of white goods, cars, luxury cars, pan masala, tobacco and aerated drinks. Additionally, access would be imposed on luxury cars, pan masala, tobacco and aerated drinks, which has been stated to be collected to fund the five year compensation to the States (in case of State tax losses on account of GST).
The consensus hints at making the tax regime complex for the consumer durable industry. Under the suggested tax structure consumer durable product details need to be worked out by the council to reduce the burden of complexity for the industry. Secondly, multiple registrations across states under the suggested GST model might add more hindrances.
Commenting on this Manish Sharma, President, CEAMA said, “The industry awaits detailed slab segregation from the council on all the consumer durable items and the percentage of tax to be levied on them. The industry is looking forward to the final discussion further to the meeting today and then will be able to formulate a strategy around it. While the common man stands to benefit with the current tax structure in relation to the lower rate products, the scope of the 28 percent rate products is concerning our industry. Most of our products today attract an effective Excise rate of approx. 8% (after abatement) on MRP and VAT between 12% and 15%. A GST rate of 28% will increase the tax burden on the goods and this would be inflationary. The consumer durable goods are not luxury items, this increased incidence of tax on such goods will impact the consumption and therefore slow down the demand for such goods. These are items of mass consumption and therefore, we strongly request that all the consumer durable products are kept at the 18% standard rate category. This would also be aligned with the Government initiative of ‘Make in India’ and would curb the inflationary impact”.
The committee of secretaries will put pen to paper and finalize the allocation of items into different categories shortly. The council is also working on a similar tax structure for services as well. The industry will also be commencing an internal discussion with the members post finalization of the tax structure.