GST - The Rate of Tax Debate

October 21,2016
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K. Vaitheeswaran, Advocate

Press Reports indicate that various options have been debated at the GST Council with reference to GST rates and there is a possibility of a multi-rate structure which could range from 6% to 26%.  This is without considering the exempt and zero rated segments.

The issue largely has arisen out of marketing and product mismatch.  The marketing of GST with the slogan ‘one nation – one tax’ was very effective and the public at large and even large businesses believed that there would be one GST rate, which unfortunately is not practical.  It is impossible to implement GST with one rate, given the vagaries in the rates under Central Excise and VAT Laws. 

The following table brings out the general key differences in existing rates between Central and State levies:

Product

Excise Duty

VAT

Cooked food items

Exempt

Taxable

Tea including tea waste

Exempt

Taxable

Preparation for infant use in unit containers

Exempt

Taxable

Biscuits where RSP does not exceed Rs.100/- per kg.

Exempt

Taxable

Tractor

Exempt

Taxable

Ice-cream and non-alcoholic  beverages prepared and dispensed by vending machine

Exempt

Taxable

Sweetmeats, mixtures and similar edible preparations

Exempt

Taxable

Concrete Mix or RMC at site

Exempt

Taxable

Supplies against ICB

Exempt

Taxable

Supplies for power projects

Exempt

Taxable

Newsprint in reels

Exempt

Taxable

Special purpose motor vehicles

Exempt

Taxable

Vehicles designed for transport of more than 6 persons excluding driver

Exempt

Taxable

Vehicles designed for transport of compressed or liquefied gases falling under 8704

Exempt

Taxable

Three wheeled motor vehicles

Exempt

Taxable

Customized software, audio cassettes

Exempt

Taxable

*The position is different in some States.

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