2. Introduction
• Goods and services tax or GST is an important fiscal instrument to
ensure efficient, equitable and sustainable economic growth.
• India switched over to GST in 2017, bringing all economic activities,
including those related to agricultural sector, under its ambit.
• Goods and service tax ―is a comprehensive indirect tax levied on
manufacturer, sale and consumption of goods and services
throughout India
3. Why GST?
• Goods and Services tax better known as GST in India, is a new and
comprehensive tax to be levied on sales, manufacturing and
consumption of services and goods across the nation. Referred to as
one of the biggest tax reforms in the country, GST is expected to bring
together state economies and improve overall economic growth of
the nation.
• The introduction of goods and services tax on 1 July 2017 was a very
significant step in the field of indirect tax reforms in India.
• GST is a great example of cooperative federalism, where all the
states decided to take a unanimous decision in the interest of the
nation, and then such a huge tax reform could be implemented in the
country.
4. • Introduction of GST would make Indian products competitive in the
domestic and international markets.
• It will boost export and manufacturing activity, generate more
employment and thus increase GDP with gainful employment leading
to substantive economic growth.
• Ease of doing business
5. Features and Trends
• Data analytics, compliance will be the key corner stones.
• introduction of the GST is expected to have significant
macroeconomic implications in terms of growth, inflation, export
competitiveness and the fiscal balance in the years ahead.
• As GST enters its second year, the government is planning to bring
out some more changes to the existing structure of this indirect tax.
• Rate rationalization is expected by various industry groups.
6. BENEFITS
• Reduce the cost of doing business
• Increased tax revenues to the government
• Reduction in multiplicity of taxes, cascading and double taxation
• Consumption based tax
• Exports to be zero rated:all exports and supplies to sezs and sez units would be
zero-rated.
• Overall reduction in prices for consumers, uniform rate of tax and common
national market
• No check posts, logistics benefit: free flow of goods and services
• Broader tax base and decrease in “black” transactions
• Option of voluntary registration
• Compensation for loss of revenue to states for five years
7. • Various modes of payment of tax available to the taxpayer including
internet banking, debit/ credit card and National Electronic Funds Transfer
(NEFT) / Real Time Gross Settlement (RTGS).
• Will help to create a unified common national market for India, giving a
boost to foreign investment and “Make in India” campaign.
• Uniform SGST and IGST rates will reduce the incentive for evasion by
eliminating rate arbitrage between neighbouring states and that between
intra and inter-state sales.
• Average tax burden on companies is likely to come down.
• Expected to reduce prices and lower prices mean more consumption.
• GST is expected to bring buoyancy to the government revenue by widening
the tax base and improving taxpayer compliance.
• Increase the tax payer base for both direct and indirect taxes.
• increased formalisation of the economy. Increased GDP.
8. • Increased compliance costs
• Revenue neutral rate (RNR). Even after many reports it is difficult to arrive
at the rate
• Designing and testing of the new return filing system, stabilizing the e-way
bill system and minor corrections .
• Evolving GST-related laws.
• A number of implementation issues related to it systems, legal challenges,
exports, return filing and reconciliations, passing on transition credit, ant
profiteering in GST etc. Are being faced by field formations of states.
• Several transactions take the character of sales as well as services, thus
there is complexity in determining the nature of transaction.
• There are various definitional issues related to manufacturing, sale,
service, valuation etc. Arises. These needs to be rationalized.
9. ISSUES & CHALLENGES
• Radical reform
• Still many rates in the system. Will take time to stabilise – 3 to 4 years
• Teething problems
• Temporary medium term slow down in business / tax collections
• Different administrative policies and systems in different states
• Business model change. Companies withdrawing GST registration.
• Alcohol for human consumption, real estate and five petroleum
products — crude oil, diesel, petrol, natural gas, aviation turbine fuel —
are still out of the GST ambit.
12. GST Facilitation Cell
• With a view to Facilitating the rollout of Goods &Services Tax(GST), a
"GST Facilitation Cell" headed by the Economic Adviser has been
constituted in the Ministry in the 20th June,2017.
• The GST Facilitation Cell will provide all possible support for the
rollout of GST to the major industry and business associations relating
to MOFPI.
• This Cell will serve as the first point of contact for addressing any
issue being faced by any sector related to this Ministry.
• The GST Cell will be equipped with the complete knowledge of the
relevant GST Act/ Rules/ Rate Structure etc.
15. NIL or 0% GST
1.Meat (Other than in frozen state and put
up in container)
2. Bones and horn cores, bone grist, bone
meal etc., hoof meal, horn meal, etc.
3. Fish, prawn and shrimp seeds
4. All fish, fresh or chilled (but not
processed, cured and frozen)
5. Fresh milk, pasteurized milk but not
concentrated, sweetened
6. Eggs (in shell)
7. Curd, lassi, buttermilk
8. Chena or paneer (except in unit
container with brand name)
9. Natural honey (no container-no brand)
10. Fresh fruits and vegetables, roots and
tubers (except in frozen state or
preserved)
11. Dried fruits
12. Leguminous vegetables, shelled or
unshelled
13. Dried leguminous vegetables, shelled,
whether or not skinned or split (pulses)
14. Coffee beans, unprocessed tea leaves,
fresh spices
15. All cereals (no container-no brand)
16. Cereal grains hulled
17. Flour
18. Atta, Maida, besan (no container-no
brand)
19. Wheat or meslin flour
20. Cereal flour, groats and meals (no
container-no brand)
21. Flour of potato, dried leguminous
vegetables (no container-no brand)
22. Oilseeds of seed quality
23. Cane jiggery (gur)
24. Palmyra jaggery
25. Puffed, flattened and parched rice
26. Pappad (except when served for
consumption)
27. Bread (branded or otherwise) (except
when served for consumption and pizza
bread)
28. Prasadam
29. Water (other than aerated, sealed etc)
30. Non-alcoholic toddy
31. Tender coconut powder
32. Acquatic, poultry and cattle feed
33. Salt, all types
34. Cotton seed oil cake irrespective of
end use
16. 5% GST
• All fish variants (except seeds of
fish, prawn& shrimp) processed,
cured, frozen state
• 2. Ultra-high temperature milk
• 3. Milk and cream including
skimmed milk powder but
excluding condensed milk
• 4. Yoghurt and other fermented
milk and cream
• 5. Chena or paneer in unit
container and branded
• 6. Egg yolk, fresh or dried
• 7. Natural honey in branded unit
container
• 8. Vegetables frozen or
preserved (but unsuitable in that
state for immediate
consumption)
• 9. Edible fruits and nuts; peel of
citrus fruit or melons, in frozen
or preserved state
• 10. Coffee, tea, pepper, vanilla,
cloves, cardamoms
• 11. Seeds of anise, coriander,
cumin
• 12. Ginger (other than fresh
ginger), saffron, turmeric, other
spices
• 13. Cereal groats, meal and
pellets in branded unit container
• 14. Cereal grains worked upon
(hulled, rolled, flaked)
• 15. Meal, powder, flakes,
granules and pellets of potatoes
• 16. Meal and powder of the
dried leguminous vegetables
(pulses, sago, tamarind)
• 17. Wheat gluten
• 18. Soya beans
• 19. Ground nuts
• 20. Copra
17. 12% GST
1. All meat in unit containers put up in
frozen, salted, dried, smoked state
2. All meat and marine products
prepared or preserved.
3. Butter, ghee, butter oil
4. cheese
5. Ketch-up & sauces,
6. Dry fruits
7. Starches
8. Animal fats and oils
9. Fruit and vegetable juices
10. Roasted chicory and coffee
substitutes
11. Yeasts and prepared baking
12. Namkeens put up in unit
container and bearing a brand name,
bhujiya, mixture, chabena
13. Bari made of pulses including
mungodi
14. Soya milk drinks
15. Fruit pulp or fruit juice based
drinks
16. Tender coconut water (in unit
container with brand name)
17. Beverages containing milk
18. Batters including Idli/Dosa batter
19. Condensed milk
20. Refined sugar, sugar cubes
21. Pasta, whether or not cooked or
stuffed (with meat or other
substances) or otherwise prepared,
such as spaghetti, macaroni, noodles,
lasagna, gnocchi, ravioli, cannelloni;
couscous, whether or not prepared
22. Curry paste, mayonnaise and
salad dressing; mixed condiments and
mixed seasoning
23. Diabetic foods
24. Sugar boiled confectionary
25. Drinking water packed in 20
litters bottles
18. 18% GST
• 1. Malt, whether or not roasted
• 2. Sugar confectionery
• 3. All preparations of cereals, flour,
starch or milk for infant use and
sold retail
• 4. Corn flakes and other cereal
flakes
• 5. Waffles and wafers (other than
chocolate coating)
• 6. Pastries and cakes
• 7. Extracts, essences and
concentrates of tea or mate
• 8. Soups and broths
• 9. Ice cream and other edible ice
• 10. Instant food mixes, soft drink
concentrates, sharbat, betel,
supari, packaged food
• 11. Water, including natural or
artificial mineral waters and
aerated waters not sweetened
• 12. Ethyl alcohol and other spirits
• 13. Vinegar and substitutes
• 14. Custard powder
• 15. Chewing gum/bubble gum
and white chocolate, not
containing cocoa (17041000,
17049090)
• 16. Cocoa butter, fat and oil
• 17. Cocoa powder, not containing
added sugar or sweetening matter
• 18. Chocolates and other food
preparations containing cocoa
• 19. Malt extract (other than for
infant use and mixes and doughs
of bakers)
• 20. Waffles and wafers coated
with or containing chocolate
• 21. Extract, essences and
concentrates of coffee
• 22. Other non-alcoholic beverages
19. 28% GST
• 1.Molasses
• 2. Pan Masala
• 3. All goods [including aerated
waters] containing added sugar or
other sweetening matter or
flavoured
20. Fishery
• Fishery: With the implementation of GST, fishery sector may face
initial hiccups as the fishing tools, as well as some of the aquatic
products, have subsumed under the tax net.
• Fishing hooks, fishing rods, fishing tackles, and fishing twines which
were earlier exempted from taxes are now taxable at 12% and fishing
ropes are taxable at 18%.
• However, the tax on fishing vessels maintains status quo at 5%.
Outboard motors and ice boxes which were taxed at 14.5% in the
earlier regime now attract a GST of 28% and 18%, respectively.
21. • Many processed aquatic products, like
dried/salted/smoked/chilled/frozen fishes, mollusks, crustaceans and
aquatic invertebrates which remained outside the tax ambit earlier,
are now taxable at 5%, but fresh aquatic products remain outside the
tax net after GST implementation.
• Increased tax burden on processed aquatic products would render
them less competitive in domestic as well as in international market.
22. Dairy Sector
Indicative
products
Excise VAT VAT Total Tax Likely under GST
Milk Nil Nil Nil Nil/12%
Ghee, Paneer etc. Nil 5.5% 5.5% 12%/20%
Cheese, butter
etc.
Nil 12.5% 12.5% 20%
Some other
sweets/
products/drinks
2%/6%
2%/6%
5.5%
12.5%
7.5%/11.5%
14.5%/18.5%
20%
20%
Source: GST on Dairy Sector- Discussion Draft
23. • During pre-GST regime, the grass, hay, straw, concentrate, oil cakes,
and feed from food industries were exempted from the central levies.
Now ,oilcakes and other solid residues are taxed at 5%.
• On the other hand, a 1% reduction in tax on veterinary medicines in
the GST regime may lead to reduced expenditure on veterinary
medicines.
• On the output front, due to the relatively elastic demand for dairy
products, higher taxation on the processed dairy products may
negatively affect their demand. It is further apprehended that the
consumers (with elastic demand for processed and packaged dairy
product) may source their requirement from the unorganized sector.
24. • GST rates on branded butter, cooking fats and cheese have been fixed at
12%. This is higher compared to prevailing rates of 6% and is likely to
impact their consumption.
• Additionally, unpackaged butter, cooking fats and cheese have been
exempted from GST. This move would further widen the price differential
between packaged and unpackaged milk products.
• Branded milk products players may have to face renewed challenge from
the unpackaged market owing to substantial price differences due to GST.
• Branded butter and cooking fats which are usually consumed by the
affluent classes have low price elasticity. Hence price hike due to higher
GST rates is not expected to have much impact on consumption patterns.
• Consumers of these products are willing to spend more based on the value
they perceive.
25. Opportunities
• Removal of exemptions- higher availability of credits
• Reduced variations in rates of tax across states discriminatory margin
for company/ dealers to be reduced
• B2B Sale- reduced cost to customer as ST/ED credit converted to GST
available to them.
26. Challenges
• MRP Products - Price not altered- squeezed margin
• Non MRP Products- need of price variation to sustain margins
• Price rise- Consumer perception management
27. Impacts
• Initial proposals to tax all dairy products includingfresh milk under
18% GST bracket could have had a negative impact on the Indian dairy
industry. India is the largest producer and consumer of fresh milk and
employs over 10million dairy farmers.
• Any increase in tax rates on fresh milk would have a drastic impact on
the livelihood of millions of people involved in this industry.
• Fresh milk which is the largest contributor to the dairy industry has
been exempted from the finalised GST rates.
• However, UHT milk which has a niche share of the market has been
brought under 5% GST.
• In the scenario of semi skimmed fresh milk being brought under a 5%
GST rate similar to UHT milk – consumption would drop
28. Edible oil
• Edible oils overtook dairy to become the largest category in the Indian
packaged foods market in the year 2016, as hygiene concerns and the
growing interest in products offering health and wellness benefits
drove the rapid shift from unpackaged to packaged oils.
• On the back of this trend, edible oils managed to register retail value
growth of CAGR 27% between 2011 to 2016.
• Proposed GST rates for edible oils of 5% is significantly lower than
prevailing rates of 12%.
• This is expected to help boost the branded edible oils market with the
shift from unpackaged to packaged edible oils expected to further
accelerate over the coming months.
29. • As income levels are low, masses usually buy smaller quantities of
edible oils or in loose format.
• Lower GST levels is going to bring these consumers into the organised
packaged edible oils market.
• A concern for edible oils players is that oilseeds have been levied a 5%
tax under GST which would impact their margins.
• Oilseeds are the input for edible oil manufacturing and manufacturers
will be able to only partially recover this amount in terms of GST
refund.
30. Opportunities
• Lower GST rates for edible oils is expected to boost premium edible
oils brands.
• The growing health and wellness trend in India has led to edible oil
players launching products on the health platform and charging a
premium.
• More players are expected to launch products on the lines of Adani
Wilmar’s ‘Fortune VIVO Diabetes Care Oil’ targeting people with type
II diabetes, Ruchi Soya Industries ‘Sunrich Sunflower Oil’ enriched
with vitamins A and D, etc. and tap into the premiumisation trend.
31. Biscuits Market
• Uniform tax slab of 18% levied under
GST across plain biscuits, filled biscuits
and cookies with the government
doing away with variable tax structure
within biscuits.
• Plain biscuits to be impacted most as
taxes under GST set to become more
than double compared to prevailing
rates.
Source: Euromonitor International
32. • Plain biscuit manufacturers will be forced to increase prices due to rise in
input costs and slim-margins within a highly competitive and price sensitive
market.
• Some biscuit manufacturers also likely to maintain their prices at pre-GST
level by reducing the quantity or size of biscuits.
• The share of plain biscuits which has been declining between 2006 to 2017
will witness steeper declines due to rise in average unit prices owing to GST
and higher price elasticity.
• Impact on cookies and filled biscuits to be marginal as GST rates are on
similar lines with existing tax rates.
• Consumers also likely to shift to consumption of pastries and biscuits
available at local bakeries due to the higher price differential between
packaged and unpackaged products.
33. Opportunities
• GST likely to change biscuit consumption habits of consumers in India.
Consumers most likely to shift from plain biscuits to cookies and filled
biscuits based on price hikes and reduced price differential.
• Players operating in the premium space have opportunities of
portfolio expansion to tap into the opportunity presented by GST.
• Leading players including Britannia Industries Ltd, ITC Group and Parle
Products Pvt Ltd can focus on value addand premium biscuit range for
higher value gains.
34. Branded Rice
• Branded rice was earlier either exempted from tax or carried a 5%
VAT, depending on the state where it was sold. Under GST, across the
country, all branded rice will be taxed at 5%.
• This move is expected to impact the profitability of the branded rice
players. Additionally, branded players will now face increased
competition from the unpackaged market due to rising price
differentials.
• To counter this threat, branded rice players are expected to maintain
prices and absorb the hike in costs due to GST.
35. • ‘India Gate’ rice brand exempt from
GST
• India Gate, the country’s largest
selling rice brand, is exempt from
paying GST because the company did
not get the brand name registered
under the Trade Marks Act 1999.
36. Instant Noodles
• The government had initially proposed a GST rate of 18% for instant
noodles. Based on feedback from the industry, the tax rates for 66 items
were revisited and revised.
• The GST rate for instant noodles was also revised down to 12% from initial
proposal of 18%.
• The instant noodles market in India faced its biggest challenge in 2015 due
to regulatory issues which banned the largest brand in the market.
• This impacted the sales of the overall category leading to massive declines
due to the ban and negative consumer sentiments.
• However, the instant noodles market did show a recovery in 2016.
• The big drop in tax rates for instant noodles from prevailing rates of 26% to
12% under GST is expected to significantly boost consumption.
37. Beverages
• Even though liquor hasn’t been brought under the purview of Goods and
Services Tax, it still falls under other taxes that contribute to its rising
prices. These taxes are:
Excise Duty
VAT (Value Added Tax)
• Alcohol was not brought under the purview of GST regime primarily due to
two reasons:
• To ensure that the State Governments continue to have a strong inflow of
revenue (other than what they get from GST). It’s estimated that taxes on
liquor and beer fetch the state governments nearly INR 90,000 crores
annually.
• To keep the prices of liquor and beer high to limit consumption.
38.
39. Restaurants and Food Service
• Prior to GST
• KKC- Krishi Kalyan CESS
• SBC- Swachh Bharath CESS
40.
41. Benefits
1.Administrative Ease: One Nation, one tax policy can facilitate to bring
uniformity within the world league for the GST regime. The introduction of
GST will be only charge that hotels must account for with elimination of
various taxes and cesses. This implies reducing procedural steps and creates
to more opportunities to streamline the process taxation.
2. Reduction of taxes on food bill by approx. 9.5% can play a key role in
attracting more customers at the restaurants.
3. Small scale restaurant owners will benefit by minimum block of 5-12% tax
or no tax, looking on the yearly turnover.
4. The new GST scheme can facilitate in generating government revenue, cut
back corruption and cut back business prices for restaurants.
5. Time saving and Improved Quality: The purging of a lot of entries from the
accounts book under name of various taxes leads to faster processing of a
transaction. This will also help the consumer in availing faster and fresher
orders with room reservations made on every breezy process.
42. Drawbacks
• Technological Burden: Though the bill has been introduced by the
government along with embashing a date for rollout, there is a great
deal of ambiguity on its implementation. There’ll have to be
compelled to place systems with clear guidelines on how accounts
have to be compelled for maintenance and filling of returns. Service
tax had created a lot of confusion as well when it was launched and
hopefully the authorizes can take a lesson from there while ensuring
the seamless application of GST.
• 2. The tax bracket for budget and luxury hotels is simply too wide.
• 3. Medium scale restaurants are going to be unnecessarily force into
the tax slab of 28th tax in these budget and luxury hotels.
43. • 4. Possibility of Increased cost: Most small businesses in India don’t
use tax professionals, and have historically preferred to pay taxes and
file returns on their own to save lots of costs. However, they’ll need
skilled assistance to become GST compliant as it may be a completely
new system. Whereas this will benefit the professionals, the small
businesses ought to bear the extra price of hiring specialists. Also,
businesses would experience increase in overhead expenses as a
proper training of staff is to be given in GST compliance.
44. Competition from Asian Market: Currently India is emerging as global
competitor in hotel business and tourism. In Asian markets, India is changing
into a most popular destination owing to improved services, better
opportunities and options and reasonable costs. To own an equal status,
India GST rates must challenge its other Asian counterparts however, they
seems to be a wide gap as you’ll be able to see below:
1. Singapore = 7 %
2. Malaysia = 6 %
3. China = 11%
4. Japan = 8%
The wide difference appears sarcastically at our service providers and gives
the competitor an unfair lead to make advantage. This alone is sufficient to
make a potential tourist undergo reconsideration of their travel plan.
45. Food Exports
• India is an agro-based country and the exports are huge.
• Under the "Make in India" initiative from the Indian Government,
there are various subsidies provided by it.
• Under GST, the exports or deemed exports are zero rates taxed. This
means that exports are virtually duty-free.
• Exporters can get a refund for the exports they make or they are
deemed to make
46. Advantages of GST on food exports
• Single unified taxation system. Hassle free exporting process.
• Zero rating of exports makes Indian exports more competitive in the
foreign markets.
• Speedy legal documentation and process.
• Indian exporters consider themselves providing low prices for export
due to no GST on exports.
• Having said that GST is a blessing, it is much of a simplification for the
food product exporters.
47. Disadvantages
• The procedure for thezero-rating tax is that exporters need to bill the
products with tax and claim it as a refund.
• The legal processing is slow in India. Government is trying its best to
speed up the refund process of GST.
• The Indian food industry is not fully self-reliant.
