KPMG has explained how the new tax rates will impact the various industries. GST regime has cast doubts over the country and forced businesses.
“Under the given circumstances, GST council has done a commendable job by reducing the impact of GST on the common man and maintaining status co on GST rates on the items largely consumed by the upper middle class. It is like a mini budget short of projection of estimated revenue”
“It is welcome to see that the education and healthcare sector is out of GST and transportation services is taxed at 5%. However, the telecom services at 18% may touch the raw nerve of the common man, as that is the only significant service that is used by majority of the population in India.”
Impact on Financial services
“The Banking and financial services at 18%, can hurt the common man in wake of banks started charging fee for multiple withdrawals and 3% hike in GST, will increase the cost of banking charges”.
“The minimum GST on conversion of foreign currency has gone up from the current rate of higher of 0.14% or Rs.35 to 1% or Rs.250 for exchange up to 1 lakh rupees, above 1 lakh to 10 lakhs, it is gone up from .07% plus Rs.140 to 0.5% plus Rs.1, 000 and above 10 lakhs, from 0.014% plus Rs.7700 to 0 .10% plus Rs.5500. Maximum GST charges on conversion of foreign currency has gone up from Rs.7, 000 to 60,000. This can hurt NRIs especially those working in gulf countries who earns low wages and make remittances to their families”
“The rate of 12 % GST on works contract services is expected to give momentum to the real estate recovery as today both service tax and VAT is levied on 110% of the consideration. At present, Service tax @15% is levied 0n 40 % of the contract value and VAT/excise of appx. @18% on 70% of the value. Bringing the GST to 12% will reduce the cost of real estate in the hands of the buyer and give a much needed Philip”
“It seems the GST council belied the expectation of the industry of postponement the GST implementation, by announcing the rates for goods and services. Government seems to be gearing up for the 1st July rollout, despite being fully aware of the dangers of rushing without being fully prepared. This shows its commitment and confidence of wading through teething troubles, that is guaranteed”
Impact on Construction services
“Most of the key ingredients for construction sector such as cement, paint, plywood, veneered panels and similar laminated wood are placed in the highest tax bracket of 28%, while iron and steel will be liable to GST at 18%. This may increase the cost of procurement especially for iron and steel.”
Impact on Airlines/Tourism
“Airlines will be relieved with the lower GST rate of 5% for economy class”. “The coverage of transport sector in the 5% tax bracket is a welcome step and will ensure that the cost of transport does not increase in GST regime.”
Impact on Pharma
“The rates announced by the GST Council for pharmaceutical products is broadly in line with the expectation of the Industry. While most of the pharma products are placed at 12% rate, a lower rate of 5% for some life-saving drugs is a welcome move”.
Impact on financial services sector and telecom
“As against the expectation of the industry, the increase in the GST rate for telecom and financial services sector from 15% to 18% will increase the cost to the consumer.”
“Toy industry will see a negative impact due to increase in the GST rate to 12 percent. Presently, the toys falling under tariff entry 9503 are exempt from excise duty. Also, a differential rate of 18% is specified for electronic toys which could lead to litigation as to what would constitute an electronic toy.”
“The electrical products such as switches, relays, fuses, surge suppressors, plugs, sockets, lamp-holders, and other connectors, junction boxes have been classified under 28 percent category which is primarily for demerit goods. These electrical products are in general industrial inputs and basic necessity for household products and levying a GST at 28% is not a welcome move for the industry.”