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Discontent in industries after introduction of additional cess in GST.
Discontent in industries after introduction of additional cess in GST.
Hey guys, did you hear that the cold drinks you enjoy for your refreshment are going to dearer after implementation of GST? Didn't you ? Don't worry we will tell ou what it is about. In GST four rates of taxes has been proposed which will be 5%, 12%, 18% and 28%. 28% rate shall be applicable on luxury items, sin goods, aerated drinks and tobacco products. Besides this gst council has also approved cess over and above 28% tax rate.
The GST Council’s decision to cap the cess at 15 per cent over the expected peak rate of 28 per cent on aerated beverages and cars, and varied other rates on sin and luxurious goods has created a flutter in the market.
Though a four-tier rate structure for the new levy has been cleared, the fitments of commodities in these tax slabs would be done after March 31. While the cess on aerated beverages could spike the retail prices, for some organised players in tobacco industry it may not have much impact. However, the actual impact on prices will be known only after the fitment of slabs for these products. Fearing such a levy, soft drink companies have been pitching for a differential GST structure based on sugar or calorie content. Hit by higher levies in the form of soda or sugar tax in several countries, companies such as Coca-Cola and PepsiCo have made commitments to cut down on sugar content.
Mr. Krishan Arora, Partner, Grant Thornton India LLP, said, “Considering the existing indirect tax structure for aerated beverages, which effectively results in a cumulative tax of 39-40 per cent, prices of aerated beverages could be impacted adversely in case the maximum cess of 15 per cent is imposed in addition to the proposed cumulative GST rate of 28 per cent. After this additional cess the total rate of tax on aerated drinks could very well reach upto 43%. As such cess will also not be creditable in the supply chain, this could further aggravate the impact in case the same"
Last November, the Indian Beverage Association had stated that over 80 per cent of the States are taxing such beverages at less than 28 percent rate , and requested the government not to put any additional tax burden on aerated drinks. In States such as Punjab, the tax is higher at an estimated 42.85 per cent.
The cess, which would be levied on “water including mineral water and aerated water” that contains sugar or added flavouring, is expected to be levied at around 12 per cent.
The additional cesses have been imposed for two main reasons-
1. To compensate the states against loss of revenue that they will suffer after introduction of GST.
2. To discourage tabacco products, sin goods and high sugar aerated drinks.
