The industry doesn’t necessarily have to wait for the government to announce rates that various categories of goods and services would attract under the government’s biggest tax reform—the Goods and Services Tax (GST).
Tax slabs can now be estimated based on a simple formula, Revenue Secretary Dr Hasmukh Adhia said on Thursday.
“As far as rates are concerned, it is possible for anybody to now make a calculation and decide for themselves what the rate is going to be for them because it is going to be a simplistic formula,” Adhia said at the CNBC TV18-Mint’s Budget Verdict conclave.
A committee is currently working on the “classification” exercise — a comprehensive list specifying the tax rate that each good and service will attract. The GST council has agreed on a four-slab structure – 5, 12, 18 and 28 percent — along with a cess on luxury and ‘sin’ goods such as tobacco.
A bureaucrats’ panel (of states and the Centre) is expected to classify the goods and services according to this slab structure.
“The formula is that whatever is the existing incidence of tax – excise duty plus VAT or service tax plus VAT– you calculate that. What is the present incidence your particular industry has of tax and nearest to that is fitting into, that will be the tax rate for you. So (a difference of) 3 percent here or 3 percent there,” Adhia said, adding that the calculation is more of a mechanical exercise now and nobody needs to make any guesses about it.
However, there would be only few items, for which the slab may change, he said.
For items such as soaps or toothpaste, the tax incidence may end up being 28 percent.
“Since it is an essential item for everybody, the GST Council may decide to put it in a different bracket. But those set of items are very few,” he said.
Last month Finance Minister Arun Jaitley said that GST is expected to be rolled out by July 1, 2017.