7 SURPRISING ITEMS UNDER THE 28% TAX BRACKET UNDER GST

Although the final list of items proposed under GST has not been released yet, there is speculation and news regarding a few items. It is surprising to read them under the highest tax bracket of 28%! Comment below to express your views on the same.

1. Lottery Tickets: Many states receive a lot of revenue because of lottery ticket sales. Maharashtra, Goa, Sikkim, Kerala are a few states that run lotteries. Currently, these states charge minimal or zero tax on these tickets. With the proposed move of charging 28% on lottery tickets, there might be a steep decline in lottery ticket sales. This 28% will be charged on the whole face value of the lottery ticket. The face value is composed of the operator’s profit, government income, and prize money. This is seen as an unfair move by lottery providers because the price of money already falls under the standard income tax. Although on one side the move is criticized by lottery providers, state ministers support the move with the opinion that this will reduce and eliminate illegal activities under lottery schemes. It will also solve the law and order problems surrounding lotteries.
2. Bottled Water: Currently packaged drinking water is taxed differently in different states. In some states, it is VAT free because it is a basic necessity. But under GST there will be a uniform tax rate. This is to avoid malpractices involved while selling bottled water. It is speculated that packaged/bottled water will come under the 28% tax bracket. And that is pretty steep for a bottle of water! Further “mineral water” might attract an additional cess too!
3. Aerated drinks: Like bottled water aerated drinks to fall under this category! Moreover, a 15% cess will be added, making the tax on these beverages at 43%. These goods are classified as “sin” goods and thus attract heavy taxes. Moreover, the government wants to discourage people from consuming such unhealthy drinks. They might also levy a separate tax(NOT UNDER GST) on junk food(similar to the one in Kerala).
4. Cars: Small, medium or luxury cars may attract a tax of 28% plus an additional cess of 15% increasing the total tax incidence to 43%. Currently, small cars attract 27-27.5% tax while medium cars attract a 38.5% tax. Therefore the 28% tax slab might be beneficial to some and detrimental to some. However luxury cars will attract cess (mostly capped at 15%) as it is a demerit good. This cess is levied to compensate for the loss of sale on revenue to states.
5. White goods* and Television sets: For certain white goods the 28% tax slab means a price fall because they are currently charged at 30%. But for television sets and a few other white goods like washing machines, this may be a price rise as currently TV’s are charged at 24% tax. This discourages rural consumption. However, in the long run, GST will be beneficial to consumers.
6. Unclassified goods: Stamps, paintings, coins, antiques all come under “unclassified goods”. Stamp collectors fear that this categorization may attract the highest tax slab for them. They have supposedly requested the finance minister to look into the matter and not levy the highest tax slab on them as this would be a major blow to their business. Currently, most of these items escape taxation because these are auctioned items and hence buyer and seller escape the taxes.

These were a few surprising items under the 28% tax slab. Once the final list of items is revealed there will be further clarity on these items.

*Heavy consumer durables such as air conditioners, refrigerators, stoves, etc., which used to be painted only in white enamel finish

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1 TIPS FOR SMES AHEAD OF GST

2 INTRODUCTION TO GST

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