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GST: Essential to keep track of item-wise rates schedules

Broad categorisation of commodity universe suggests that most items would attract 12 or 18% of GST

Mukesh Butani 

GST: Essential to keep track of item-wise rates schedules

With the conclusion of the first day of the 14th round of the Council’s meet, is heading closer to timely implementation across the country. The Council’s approval to over seven draft rules and fitment of over 1,211 commodities (with an exclusion of six items) in various slabs takes framework towards finality. With these announcements, India Inc now has sufficient information to realign its reporting systems and existing processes in line with requirements.  

The broad categorisation of the commodity universe suggests that most of the items would attract 12 or 18 per cent of Around 60 per cent of the items have been indicated to fall within these two categories with only around 19 per cent of the items are indicated to be pushed towards the higher rate of 28 percent or more (considering cess would apply on certain items). In line with earlier indications, foodgrain and milk have been exempted from while essential commodities such as edible oil, sugar and tea are pegged at five per cent.  Also, some of the daily consumption items such as toothpaste and hair oil have been announced to be taxed at 18 per cent which is lesser than the existing effective rates on these items. These announcements of keeping items of mass consumption in the lower slabs suggests the government’s intention towards a pocket-friendly regime for the common citizen.

The list of exemptions appears to be substantially trimmed, as compared to the existing regime, with only seven per cent of total items indicated to be kept nil-rated under While this would broaden the base under GST, some of the sectors may be introduced to compliances, which could be new to them. Though this might lead to teething troubles for these sectors, overall benefits are much to be rejoiced for. By bringing existing exempt sectors under the taxation net in would lead to availability of input credits, which can be used to offset output liability. This should create transparency in taxes that a consumer actually pays while buying an exempt product by way of hidden costs. Also, the credit chain would remain intact for these sectors.

While the rates for services are yet to be decided by the Council, services are expected to get dearer as the existing 15 per cent of service could go up to 18 per cent of However, due to enhanced input credit base for service providers, the impact of incremental rate might get offset.  

Overall, the announcements have been positive thus far. However, it would be crucial to keep track of item-wise rates schedules. This is essential for the businesses to realign their IT systems, undertake cutover planning and formulate their pricing strategies in view of the transition to The recent announcements have added credence to the government’s intention of rolling out by July 1. Considering the limited time on hand, with the countdown drawing closer, industry must brace for the changes and gear up for the upcoming reform to ensure a smooth transition for their businesses. 

The writer is managing partner, BMR Legal. With inputs from Sheena Sareen