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Editorial:Welcome Change in GST Slabs by the Government

Port Wings News Network:

15 November 2017:

The 23rd GST Council meeting that concluded in Guwahati was much- awaited major relief post the Prime Minister Narendra Modi’s last year announcement.

The speculation surrounding the meeting could be compared to that of the annual union budget announcement. For many it provided a reason to cheer and for some there were more than one.

First up, the GST rates. As expected, the Government pruned down the 28 % slab comprising 227 products list to just 50. A large variety of consumer goods ranging from detergents, to chocolates to beauty products faced rate cuts while the rate for durables such as refrigerators, washing machine and notably cement was kept unchanged. It has also reduced rates from 18% to 12 % on a few items such as condensed milk, pasta, refined sugar etc. This would have a positive impact on the monthly household budget and also reduce the debate on classification issues.

An anticipated, reaction came from the prime opposition party and senior leader expressed the climb-down in social media. Former finance minister and Congress leader P Chidambaram on 11 November took a dig at the government over the Goods and Services Tax (GST) roll back in tax slabs, saying it took four months for commonsense to “germinate, flower and ripen into a fruit”.

“Ministry of finance must be complimented for ‘improving’ the macro-economic situation in four months and 10 days!” Chidambaram said in a tweet.

The former finance minister’s remarks came a day after the GST Council removed 178 items from the highest 28% category.

Furthermore, speaking at a rally in Gandhinagar, Raul Gandhi said, “It’s a good thing that the Bharatiya Janata Party (BJP) government has slashed the tax rate from 28 percent to 18 percent for many products due to the pressure made by the Congress party and the people of India.”

The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley addressing a press conference after the 23rd GST Council meeting, at Guwahati on November 10, 2017. The Minister of State for Finance, Shri Shiv Pratap Shukla is also seen.

He further said, “We are still not happy and won’t stop here. India doesn’t want five different types of taxes, we want one. There’s a need to make structural changes in the Goods and Services Tax (GST).”

However, the rate cut would require the retailers to pass on the benefits to the consumers by reducing their selling price below the MRP on the existing stock since the current MRP on those are inclusive of GST at the rate of 28%. It would indeed be interesting to see whether the end consumer gets the benefit of the rate reduction on the existing stock as well. At the industry’s end, it would require a repricing exercise at the factory level with the new lower MRP.

While the rate reduction would bring relief to the consumers, its impact on the coffers and retail price index is yet to be studied in detail. The rate related changes would take effect from November 15, 2017.

The issue of allowing inter-state sale still remains unresolved. However, an exemption for services (in addition to the supply of goods) upto Rs 5 lakh has been allowed to ensure those with marginal service income, in addition to goods, that are not deprived of the scheme. The move should convince many tax payers to opt for the scheme who were hitherto apprehensive of the scheme owing to rate, threshold, etc.

To sum up, the decisions sounded a bold move and all ears to the industry. Instead of frequent monthly extensions, suspension for the entire fiscal year would provide much needed time for a softer landing.


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