News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« Indirect Tax »
 Govt gives businesses four months to settle indirect tax disputes
 ITR filing becomes easy via new 'e-Filing Lite' portal - 5 things to know Income Tax Return
 No income tax on interest from accident compensation: High Court
 How much tax do you need to pay for your equity investments?
 Income Tax Department proposes new norms for taxing MNCs in India
 Can you claim tax benefit for tax paid on insurance premium? a
 Top 30 Income Tax Judgments in 2018
 Urban Development and Housing Department, Chakradharpur, Jharkhand
 National Rural Health Mission, Faridabad - Haryana
  Govt fails to release exporters’ pending sales tax refund claims
 Govt fails to release exporters’ pending sales tax refund claims

New indirect tax regime
June, 05th 2017

After months of deliberation, the Goods and Services Tax (GST) Council finalised the tax rates to be levied under the new indirect tax regime. As such, there will be four tax slabs corresponding to 5, 12, 18 and 28 per cent, respectively. While taxes on white goods and telecom have been bumped up to 28 per cent and 18 per cent, respectively, those on items such as soap and toothpaste have been lowered as shown in Chart 1.

Some are concerned that the shift to the GST is likely to increase firms’ working capital requirements. A study by India Ratings and Research suggests that even if a fourth of the firm inventory is procured locally, the aggregate input credit lock-up is likely to be roughly Rs 1 lakh crore (Chart 2). Even if half of this “is not available for set off during the transition phase, it would result in blockage of Rs 50,000 crore of input credit for about two month”. This could impact the liquidity in the system.

The rates have allayed fears that the GST would be inflationary in the short term. As Chart 3 shows, higher taxes on services are likely to be offset by lower taxes on food and beverages, limiting the impact on headline inflation. But it ultimately depends on the extent of pass through and the availability of input tax credit. According to HSBC Global Research, full pass through of lower taxes into prices, coupled with the full availability of input tax credit, would reduce the CPI by 0.8 per cent. But if there is no pass through and only partial input tax credit then the CPI could rise by 1.2 per cent as seen in Chart 4.

With a plethora of rates, as opposed to the original proposal of a single rate, the impact of the GST on growth, in its current form, is likely to be lower. HSBC estimates while an ideal GST structure would have boosted growth by 130 basis points, in its current form, the impact is likely to be lower, around 40 basis points (Chart 5).

Home | About Us | Terms and Conditions | Contact Us
Copyright 2019 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions