GST: Prices may rise, says industry; Not inflationary, says government

What will happen to the average household’s expenses when the goods and services tax ( GST) is imposed across India on July 1? Industry insists that bills will go up. Prices of televisions, refrigerators and air-conditioners are set to rise 4-5%, while mobile phone bills and handsets themselves are likely to get dearer, as will soft drinks, laptops and desktops, according to manufacturers and dealers. Meanwhile, fees for banking and insurance transactions could increase after the government finalised an 18% rate for most services, against about 15% now.

All this is based on GST Council fitting goods and services to the various slabs at its meeting on Thursday and Friday.

But the government pointed out that these calculations miss a key caveat — that of input credit or taxes that can be claimed back.

Revenue secretary Hasmukh Adhia said prices of most goods, including small cars and consumer durables, should drop as the effective tax will be lower as companies take advantage of seamless input tax credit.

Currently, most goods face central excise duty of 12%, infrastructure cess of 2.5%, national contingency and calamity duty of 1%, value-added tax of 12.5%, entry tax of 1% and central sales tax of 2%, besides 4.5% octroi in Maharashtra, Adhia said. This will now be replaced by GST plus a cess where applicable with no tax cascading, bringing down the overall tax burden. This would also apply to consumer durables, he said.

Even on telecom and financial services, finance minister Arun Jaitley said the effective tax with seamless input tax credit would come to 15%, meaning it will be little changed. That’s been the overarching thrust of GST all along, to ensure minimal disruption while turning India into a common market.

Meanwhile, power, coal, renewable energy and mines minister Piyush Goyal said the 5% GST rate on coal will make electricity affordable for the poor and farmers, apart from the overall benefits of greater transparency and less corruption.

On the other hand, hybrid cars will be taxed even more than small petrol and diesel vehicles, equivalent to SUVs, the auto industry said.