You are here: Home » Economy & Policy » News » GST
Business Standard

Govt fixes GST rates on all items: Impact on sectors and stocks

The GST Council will meet again on June 11 and review the rates based on industry representations

Sanjeev Zarbade  |  Mumbai 

GST, tax

Finance Minister Arun Jaitley over the weekend announced rates for a number of commonly-used items, including footwear, apparels and gold, following the 15th meeting of the Council. We have analysed the impact on some of the major commodities.

Gold, jewellery, silver and diamond will be taxed at a rate of 3% against the current effective rate (excise plus VAT) of 2%. A higher rate would have enhanced tax evasion and smuggling. While this would make buying jewellery costlier, the move to levy higher tax would benefit the larger players in the organised sector.

Retailers believe that consumer durables like TVs, ACs and Washing Machines, which will be taxed at a higher rate under GST, will lead to product price hikes. However, there is a difference of opinion in some quarters. Blue Star, a leading AC manufacturer, has indicated that there may not be any price rise in ACs post

Biscuits will be taxed at a flat rate of 18 per cent, which was a bit surprising. costing up to Rs 500 will be levied a 5 per cent and those above Rs 500 would be taxed at 18 per cent. However, industry feedback indicates that the effective rate for most categories of is nearly 22-23%. Hence, the rates would be largely neutral to positive for the industry.

In the category, silk and jute fibres have been exempted, while cotton and natural fibre and all kinds of yarns will attract at the rate of 5 per cent. Man-made fibre and yarn will, however, attract an 18% tax rate. The government’s move to keep the rates on various including cotton fibre and low-priced garments roughly around the current levels will prevent any flare up in prices.

Bidi would be taxed at the highest rate of 28% but unlike cigarettes, there will be no cess on bidi. This was again largely expected and is neutral to marginally negative for companies like

On the other hand, Mobile phones, Luxury cars and groceries would become more affordable as the rate is lower than the present effective tax. Watching movies at theatres could cost less, as the 'entertainment tax' levied by states has been subsumed in the and the effective levy has been kept at 18%.

The Council also decided to amend the transition rules allowing traders and retailers to make claim of 60 per cent against the or dues where the tax rate exceeds 18 per cent. For tax rate below 18 per cent, it will be retained at 40 per cent. The draft transition law provided that once is implemented, a company can claim credit of up to 40 per cent of their Central dues for excise duty paid on stock held by businesses prior to the rollout. A leading AC manufacturer had indicated if the increase in credit limit did not come, it would have had to compensate dealers for any loss in inventory. Thus, this is likely to come as a relief to retailers and manufacturers alike.

The Council will meet again on June 11 and review the rates based on industry representations in case the fitment committee finds that there is a substantial increase from the present burden. It will also take up the rules for e-way bill and accounts and records.

(The writer is Vice President - PCG Research at Kotak Securities Limited)

First Published: Tue, June 06 2017. 14:06 IST