GST Impact on Luxury Goods

By Registrationwala

26th May 2017

 

Is your daily essential considered to be a luxury commodity by the government under GST act? Multiple commodities that were previously considered as a daily essential for every middle-class common man from July first will be slapped a hefty tax in the name of a luxury product. On the other hand, commodities involving mass consumption will be offered at a cheaper price at the execution of Goods and Service Taxes on July 1.

The newly implemented GST rule is all set to roll out on 1st of July if all works in the favour of the government. This rule may need extra time for its implementation which means that the current government has time till September 2017 to execute the transformational tax system.

As per the regulations proposed by the GST council the cap on the CESS on Luxury goods under GST system will be at 15%. This could surge the total GST rate up to 43% on luxury items. Items such as aerated drinks, coffee, luxury cars, mobile phones and everything else that falls under this bracket will face an additional cess of 15 % apart from the already 28% slab that it exist in.

This is an initiation of the plan conceptualised by honourable PM Narendra Modi’s idea of Short term pain long term gain that indicates theintroduction of policies that reap long-term benefits for the people occurred by short-term inflationary pressures.

What can a common man expect from GST on luxury goods?

The GST council has now put luxury tax at the highest slab of 28 percent with an extra cess of 14%

What were essential commodities back then such as butter, coffee, mustard, shampoos, grooming products such as shaving foams and other condiments will now be treated in the space level as that of yachts, private jets and maybe even owning a racehorse.

Products that do not fall under the bracket of theessential commodity will now be slapped with a higher tax rate under GST. These products are not that of mass consumption and hence no hindrance will be faced by common man

Products that fall under the 28% bracket are that of cosmetics, beauty products, room fragrances and oral care products such as dental floss.

The GST on women hygiene essentials such as sanitary napkins and tampons is taken with a pinch of salt where internet campaigns have stirred a rebellious youth wanting a change in the proposed bill.

On the brighter side, 80% of the consumer goods are exempted from this hefty tax slab and is kept under 18 per cent. Only around 12- 13 percent of goods are under the slab of 28% which in most cases can be considered as acceptable.

Paints have also been subjected to this new taxation system where the highest tax slab will also see paints as its contender. The council considers paints as ornamental and not instrumental need. Thus resulting in a shoot up in paint prices. This decision has not been taken down well with the paint industry that considered paint as an essential commodity that takes care of the wear and tear of their basic necessity –The house.

Electronic commodities such as refrigerators and ACs will also be treated as luxury goods and will fall under 28 percent slab.

Working class people enjoying free or subsidised facilities provided by their workplace will also be brought under the tax radar.

The citizens of our country are divided and this new luxury tax has been received with mix reactions from everyone across the nation. What works in favour and what not only can be judged post its implementation.

 

 

 

 

 

 

GST Impact on Luxury Goods

2017-05-26