Sector-wise GST impact analysis

New regime kind on life savers, tough on sinners

Pharmaceuticals

• GST rates for specified life-saving drugs at five per cent, which is similar to the current regime

• GST rate is pegged at 12 per cent for other medicines, compared to the existing rate of eight-nine per cent

• Key raw material for manufacture of formulations (i.e. active pharmaceutical ingredients or API) could be at 18 per cent, thereby leading to inverted duty structure under GST

Automobiles 

• Indirect tax incidence on two-wheelers as well as small cars (<4 meters) to largely remain the same as present, with GST rate at 28 per cent.  Additionally, a cess of one per cent for small petrol cars (<1,200cc) and 3 per cent for small diesel cars (<1,500cc) as well as high-end motorcycles (>350cc) would apply

• Large cars and SUVs likely to benefit, with a lowering of indirect taxes on such vehicles. Currently, SUVs attract an overall incidence of above 50 per cent, which would come down to 43 per cent (GST of 28 per cent plus cess of 15 per cent)

• GST on electric vehicles and tractors has been kept at the lower rate band of 12 per cent.  However, the manufacturers of such vehicles would face an inverted duty structure with major inputs liable to GST at either 18 per cent or 28 per cent  

• Hybrid vehicles are proposed to be taxed at the highest GST rate bracket of 28 per cent plus a cess of 15 per cent.  This could act as a dampener for OEMs proposing to invest in hybrid technology and adversely impact sale of such vehicles, unless a subsidy is separately given by the government to offset such tax incidence

• Prima facie, no major impact for commercial vehicles and parts thereof, both of which are proposed to be taxed at 28 per cent GST. No cess on commercial vehicles except for vehicles for carriage of passengers between 10 and 13 people, which will be charged a cess of 15 per cent

• Automobiles parts are proposed to be taxed at 28 per cent GST.  This could push up cost of after-sales service/ maintenance of vehicles

FMCG 

• No change of tax rates for most FMCG products should be beneficial for the sector as a whole

• Soap, toothpaste, hair oil and other items of daily use to be cheaper at 18 per cent 

• With credit efficiencies available in the supply chain, the FMCG segment should see lower prices

IT/telecom products 

• Cellular phones and parts for their manufacture will attract GST at 12 per cent; prices may go up in some cases

• Duty on imported phones to be on a par with domestically manufactured ones

• Accessories and parts of cellular phones not used for manufacturing purpose kept under 18 per cent and 28 per cent brackets. This could push up cost of after-sales service/ maintenance of cellular phones

• Tablet, computer, laptop, CD, DVD will attract GST at 18 per cent, which is similar to the existing merit rate

• Base stations, PLCC equipment, modems, routers will attract GST at 18 per cent, similar to the existing merit regime

• The government will have to come up with incentives to ensure make in India remains an attractive proposition as majority of IT & telecom enjoy abatement / exemption under current regime

• Video game consoles, set-top boxes kept under the28 per cent bracket

Cigarette & tobacco

• Tobacco leaves taxed at five per cent. Liability on buyer to pay the tax

• Tobacco and tobacco products (except bidis) will face higher GST rates compared to the current regime

• Unmanufactured tobacco, chewing tobacco, pan masala with tobacco will attract GST rate of 28 per cent with additional cess ranging between 61 per cent and 204 per cent

• Cigarettes will attract GST rate of 28 per cent with additional cess five per cent ad volerum and Rs 1,591-4,170 per thousand, which may impact the industry

(Analysis by EY)