Tax Talk

Complex web: Why too many tax slabs could defeat the very idea of the Goods and Services Tax

The GST regime could end up with 10 effective tax rates.

Going to the movies can be quite taxing now: buying a ticket for less than Rs 100 will attract tax at 18% while a ticket for over Rs 100 will be taxed at 28%, according to the latest Goods and Services Tax guidelines decided on Sunday. This is symptomatic of how India’s most sweeping tax reform since Independence is turning out to be – variable, complicated and, most of all, unpredictable.

GST is an attempt to turn India into a common market by folding all indirect taxes, from octroi to service tax, into one rate that would be consistent nation-wide. But the promise of “one nation one tax”, which is how the government has advertised it, has given way to various conditions, guidelines and complexities that make the final product much more confusing than originally envisioned.

The GST is set to be rolled out on July 1, nearly 16 years after being put in motion. But the regime will be substantially different than what most people would have imagined. For one, there are six tax rates ranging from no tax to 40% within which the central government is trying to fit all commodities. Although it still means similar products will be taxed at the same rate all over the country, this is much more complex than a single rate of 15%-18%, as suggested by reports last year.

Worryingly, GST rates are being changed by the GST council on the basis of industry representations to the fitment committee. This committee is tasked with fitting all goods and services into relevant tax brackets based on the rates and additional duties, such as excise, that they attracted earlier. In principle, this sounds fairly intuitive as one might expect commodities to be taxed at more or less the same rates as before.

In reality, however, the GST has turned out to be a complex web of conditions instead of a clean tax regime like that of New Zealand, where a flat rate of 15% is applied to all goods and services. In India, the effective number of rates will rise to 10 (plus zero tax), if one includes the addition cesses that will be levied for certain commodities, according to a recent column by Devangshu Datta for Business Standard.

“In practice, it [GST] will increase the pain of compliance, if not the cost, a lot. It also has clauses that offer scope to create a single market for corruption. Along the way, it will generate a huge amount of make-work,” Dutta wrote.

The rates finalised by the GST council are zero tax, 5%, 12%, 18% and 28%. The highest tax slab is for luxury and so-called demerit items which will also attract additional cess.

Six other cesses continue to remain in place even though the government had claimed the GST will subsume all cesses and taxes. These are:

  • Education cess on imported goods
  • Secondary and higher education cess on imported goods
  • Cess on crude petroleum oil
  • Road cess on motor spirit and diesel oil  
  • Special additional duty of excise on motor spirit
  • National Calamity Contingent Duty on tobacco, products thereof and crude petroleum oil  

Is it any better?

This complexity is precisely why the industry has been both welcoming of and a bit worried about the GST. There is still no certainty on the taxation that will follow and heavy penalties await those who miss deadlines for filing applicable forms. This is why some of them are now reaching out to bureaucrats for help.

The Chamber of Associations of Maharashtra Industry and Trade, an umbrella body for industry associations in Maharashtra, has met with the state’s finance minister and chief commissioner of sales tax to lobby for lowering of tax rates on certain commodities and also for simplification of tax slabs.

“The concept is welcome but the law needs a lot of work to make it viable for industries,” said Mitesh Modi, the chamber’s joint general secretary. He said many commodities used in the manufacture of equipment that they consider essential have been “unfairly” put under the 28% tax slab.

“Nowhere in the world you have so many tiers to the GST structure,” Modi said. “The industry was expecting merely two slabs but now we have got so many which will only increase compliance burden.”

This sentiment was echoed by ClearTax founder Archit Gupta. ClearTax is aiming to provide GST services through its online tax filing platform for businesses but Gupta said the industry is nowhere near prepared for a July 1 rollout.

“We have not seen too many people signing up for GST migration just yet,” Gupta said. “There is a lot of gap in transition and some industries are downright unaware how to go about it. Multiple slab rates do add to the complication but the government claims that it kept inflation in mind while deciding rates.”

Radhika Pandey, an economist at the National Institute for Public Finance and Policy, argued that multiple slab structures could be necessary owing to different consumption patterns and demand, but uniformity in pricing is important.

Pandey said the tax rates should be based on economics and not industry lobbying. She warned that the complexity of the GST could hurt small enterprises. “Another potential challenge could be the lack of preparedness on the part of small and medium enterprises. They may not fully understand the system in the initial phases,” Pandey said.

Still, there might be some benefit for businesses in moving to the GST as the government claims that the weighted average tax burden will come down on the average basket of commodities. Additionally, the GST subsumes a host of levies and taxes, which will now be available as input credit for manufacturing firms that currently pay tax on both the inputs as well as the final product.

“India’s current tax codes are so horribly complex that even this khichdi is an improvement,” Datta summed it up in his column. “If it does stop tax cascades, and if refunds and rebates come without undue delays, it would result in lower tax incidence for many organisations.”

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Ten awesome TV shows to get over your post-GoT blues

With those withdrawal symptoms kicking in, all you need is a good rebound show.

Hangovers tend to have a debilitating effect on various human faculties, but a timely cure can ease that hollow feeling generally felt in the pit of the stomach. The Game of Thrones Season 7 finale has left us with that similar empty feeling, worsened by an official statement on the 16-month-long wait to witness The Great War. That indeed is a long time away from our friends Dany, Jon, Queen C and even sweet, sweet Podrick. While nothing can quite replace the frosty thrill of Game of Thrones, here’s a list of awesome shows, several having won multiple Emmy awards, that are sure to vanquish those nasty withdrawal symptoms:

1. Billions

There is no better setting for high stakes white collar crime than the Big Apple. And featuring a suited-up Paul Giamatti going head-to-head with the rich and ruthless Damien Lewis in New York, what’s not to like? Only two seasons young, this ShowTime original series promises a wolf-of-wall-street style showcase of power, corruption and untold riches. Billions is a great high-octane drama option if you want to keep the momentum going post GoT.

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2. Westworld

What do you get when the makers of the Dark Knight Trilogy and the studio behind Game of Thrones collaborate to remake a Michael Crichton classic? Westworld brings together two worlds: an imagined future and the old American West, with cowboys, gun slingers - the works. This sci-fi series manages to hold on to a dark secret by wrapping it with the excitement and adventure of the wild west. Once the plot is unwrapped, the secret reveals itself as a genius interpretation of human nature and what it means to be human. Regardless of what headspace you’re in, this Emmy-nominated series will absorb you in its expansive and futuristic world. If you don’t find all of the above compelling enough, you may want to watch Westworld simply because George RR Martin himself recommends it! Westworld will return for season 2 in the spring of 2018.

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3. Big Little Lies

It’s a distinct possibility that your first impressions of this show, whether you form those from the trailer or opening sequence, will make you think this is just another sun-kissed and glossy Californian drama. Until, the dark theme of BLL descends like an eerie mist, that is. With the serious acting chops of Reese Witherspoon and Nicole Kidman as leads, this murder mystery is one of a kind. Adapted from author Liane Moriarty’s book, this female-led show has received accolades for shattering the one-dimensional portrayal of women on TV. Despite the stellar star cast, this Emmy-nominated show wasn’t easy to make. You should watch Big Little Lies if only for Reese Witherspoon’s long struggle to get it off the ground.

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4. The Night of

The Night Of is one of the few crime dramas featuring South Asians without resorting to tired stereotypes. It’s the kind of show that will keep you in its grip with its mysterious plotline, have you rooting for its characters and leave you devastated and furious. While the narrative revolves around a murder and the mystery that surrounds it, its undertones raises questions on racial, class and courtroom politics. If you’re a fan of True Detective or Law & Order and are looking for something serious and thoughtful, look no further than this series of critical acclaim.

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5. American Horror Story

As the name suggests, AHS is a horror anthology for those who can stomach some gore and more. In its 6 seasons, the show has covered a wide range of horror settings like a murder house, freak shows, asylums etc. and the latest season is set to explore cults. Fans of Sarah Paulson and Jessica Lange are in for a treat, as are Lady Gaga’s fans. If you pride yourself on not being weak of the heart, give American Horror Story a try.

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6. Empire

At its heart, Empire is a simple show about a family business. It just so happens that this family business is a bit different from the sort you are probably accustomed to, because this business entails running a record label, managing artistes and when push comes to shove, dealing with rivals in a permanent sort of manner. Empire treads some unique ground as a fairly violent show that also happens to be a musical. Lead actors Taraji P Henson and Terrence Howard certainly make it worth your while to visit this universe, but it’s the constantly evolving interpersonal relations and bevy of cameo appearances that’ll make you stay. If you’re a fan of hip hop, you’ll enjoy a peek into the world that makes it happen. Hey, even if you aren’t one, you might just grow fond of rap and hip hop.

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7. Modern Family

When everything else fails, it’s comforting to know that the family will always be there to lift your spirits and keep you chuckling. And by the family we mean the Dunphys, Pritchetts and Tuckers, obviously. Modern Family portrays the hues of familial bonds with an honesty that most family shows would gloss over. Eight seasons in, the show’s characters like Gloria and Phil Dunphy have taken on legendary proportions in their fans’ minds as they navigate their relationships with relentless bumbling humour. If you’re tired of irritating one-liners or shows that try too hard, a Modern Family marathon is in order. This multiple-Emmy-winning sitcom is worth revisiting, especially since the brand new season 9 premiers on 28th September 2017.

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8. The Deuce

Headlined by James Franco and Maggi Gyllenhaal, The Deuce is not just about the dazzle of the 1970s, with the hippest New York crowd dancing to disco in gloriously flamboyant outfits. What it IS about is the city’s nooks and crannies that contain its underbelly thriving on a drug epidemic. The series portrays the harsh reality of New York city in the 70s following the legalisation of the porn industry intertwined with the turbulence caused by mob violence. You’ll be hooked if you are a fan of The Wire and American Hustle, but keep in mind it’s grimmer and grittier. The Deuce offers a turbulent ride which will leave you wanting more.

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9. Dexter

In case you’re feeling vengeful, you can always get the spite out of your system vicariously by watching Dexter, our favourite serial killer. This vigilante killer doesn’t hide behind a mask or a costume, but sneaks around like a criminal, targeting the bad guys that have slipped through the justice system. From its premier in 2006 to its series finale in 2013, the Emmy-nominated Michael C Hall, as Dexter, has kept fans in awe of the scientific precision in which he conducts his kills. For those who haven’t seen the show, the opening credits give an accurate glimpse of how captivating the next 45 minutes will be. If it’s been a while since you watched in awe as the opening credits rolled, maybe you should revisit the world’s most loved psychopath for nostalgia’s sake.

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10. Rome

If you’re still craving an epic drama with extensive settings and a grandiose plot and sub-plots, Rome, co-produced by HBO and BBC, is where your search stops. Rome is a historical drama that takes you through an overwhelming journey of Ancient Rome’s transition from a republic to an empire. And when it comes to tastes, this series provides the similar full-bodied flavour that you’ve grown to love about Game of Thrones. There’s a lot to take away for those who grew up quoting Julius Caesar, and for those looking for a realistic depiction of the legendary gladiators. If you’re a history buff, give this Emmy-winning show a try.

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For your next obsession, Hotstar Premium has you covered with its wide collection of the most watched shows in the world. Apart from the ones we’ve recommended, Indian viewers can now easily watch other universally loved shows such as Silicon Valley and Prison Break, and movies including all titles from the Marvel and Disney universe. So take control of your life again post the Game of Thrones gloom and sign up for the Hotstar Premium membership here.

This article was produced by the Scroll marketing team on behalf of Hotstar and not by the Scroll editorial team.