A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.
India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.
For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment. Going by this formulation, about 70% of all goods could fall in the 18% bracket.
The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council will take a final call at its next meeting on May 18-19. GST, India’s biggest tax reform in decades, is expected to be rolled out on July 1.
GST seeks to replace central taxes including central excise, service tax and cesses along with state taxes including value-added tax, purchase tax and entertainment tax by a single levy, thus creating a unified national market. Moreover, industry will be eligible for seamless input tax credit that should also drive down prices as tax embedding through imposition of tax on tax inflates the final price of a product.