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GST Rate can be 16 per cent even if Council recommends higher Rate

 RS Sharma Advocate 

With chances of GST coming in place from 1st April 2017 being 50:50; the GST Council is all set to recommend GST Rate in next few days. But the rate recommended  by the Council will be the general rate and Government will have powers to declare effective lower rate. The Council is expected to decide GST rate of 18 per cent but the Government has the powers to lower effective rate.PM is expected to spring a surprise by finally keeping effective GST Rate at 16 per cent.  Thus GST Tariff  Act which will be tabled on Parliament by December may be have a higher GST rate but the Government has the powers to notify a lower effective rate by a Notification.


The implication will be that the service tax payers will pay 16 per cent tax in place  of  existing  15 per cent. But there will be big relief to Manufacturers for whom tax outgo will be 16 per cent in place of higher existing excise plus VAT in present scenario. But their profit margins  will  also shrink  as the  dealers, distributors and retailers  will also have to pay GST. Till now excise duty was paid only by the manufacturers and in most of the case excise used to be paid on 30 per cent or 35 per cent of market price or retail sale price of the goods as excise was payable only at transaction value of goods cleared. With everyone in chain coming under GST net; the consumer will be hit by higher tax and consumer products will become actually more expensive as the cost of compliance by dealers and retailers will be add to their cost. Those Consultants who are into filing of returns are already worried about 37 GST returns to be filed in a year whereas in case of existing service tax payers only 2 returns are required to be filed in a year and in case of Excise registered dealers there is quarterly return at present. Consultants who are filing returns by charging Rs.20000/- per annum are now quoting  Rs.5 Lakh per annum for filing of 37 GST returns to be filed in a year. Besides GST returns need the feeding of details of each input invoice and each output invoice which will not only consume substantial time but will also require high bandwidth data network. But Government   is going to generate enough revenue as in place of existing excise being paid on value which is 30 or 35 per cent of market price; GST will be coming to it on 100 per cent of market price. Though there is lot of hype that price of products may come down; but whether it comes down or will rise only time will tell.  

 GST Network is starting Beta testing of its software form November  and  existing Tax Payers will be allotted  GST Registration numbers and will be able to update  their details in GST Network.  

Whether GST comes with effect from 1st April 2017 or not; it has opened a world of opportunities for Consulting Companies who are selling GST Packages for Rs. 50 Lakh to Rs.1 Crore for impact analysis of GST within 30 days while the GST Tariff  and rates are yet to be notified.

 GST Network also needs to catch up with the speed. My email to their official email id  sent on 11th October remains unacknowledged and un-replied. A reminder was sent by me to CEO of GSTN Network which is yet to be replied. I have already taken up the issue with Revenue Secretary. GSTN needs to give email id and Mobile numbers of all their Senior staff on their website. (P.S.CEO of GST Network Mr. Prakash Kumar has replied to my email on 17th October at 10.31 PM that Tel & email ids of all employees are available on their site. Another mail for scheduling my meeting with him was sent by him at 1.15 AM on 18th October.The timing of mail shows GSTN is burning midnight oil in their mission)  

If GST has to come from 1st April 2017; GST Tribunals have to be in place in all the States by this date as disputes are required to be settled at the earliest in GST regime. There is slim chance of GST Tribunals being in place as the recruitment process of Members of tribunal itself takes one year in Government and until there is walk-in selection of Members bypassing all the rules; there is no chance of Tribunals being in place. Whether GST regime can work without Tribunals? The systems will be in place by 1st April 2018 and it will be more prudent to start when you have the system in place.

 (Writer is a Lawyer based in Delhi/Gurgaon. He is advising several MNCs, PSUs & Indian Corporates on Service Tax, Excise, Customs & Foreign Trade issues. He can be mailed at )

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