Will GST Really Spike Up Your Bills?

As goods and service providers can claim input tax credit, your net tax bill will reduce say experts

- S Vijaykrishnan

The government’s announcement of the rate fitments under the Goods & Service Tax (GST) re-gime have created a lot of brouhaha over how the common man’s bills are set to rise. But before arriving at any generalisation, it is necessary to understand the reason why the GST rates have been fitted as they have been.

Experts that the Finapolis spoke to say that a tax regime always works to lower the gap between rich and poor, which results into a higher tax on goods/ services consumed largely by the high-income group bracket. The other challenge for the government was to set rates in a manner that doesn’t affect the exchequer’s revenue in the post GST era (i.e. in a revenue neutral manner).

Saurabh Gupta, Chartered Accountant, Gupta Saurabh & Co told the Finapolis, “The government had the option to prescribe a single GST rate for all products, but this would have resulted in high inflation, defeating the GST’s basic principles. Though a one-two GST rate structure followed in many countries sounds simple, a four-slab structure with cess on luxury goods seems to be a right fitment for the progressive Indian economy.”

Another key point to note is that the government has merely declared the rates and not ‘notified’ them yet, Gupta added. Reports indicate that the list of rates announced in the May 18-19 meeting may undergo some changes at the GST Council’s next meeting on June 3.