ASIA: India’s new GST tax is now effective

Following the announcement of India’s tax reform early this year, the new tax system on Goods and Services (GST) is now effective and has been rolled out starting 1st July 2017. Under the new tax reform, GST will be applied as a single national sales tax instead of as several centrals and state levies. Previously goods will be taxed multiple times and at different rates according to where the goods were produced and delivered to.

Under the new tax scheme, different goods will be taxed at a different level. Untreated goods such as fresh vegetables and fresh milk will not be taxed while tea, coffee, sugar will be taxed at 5% and packed food such as bottled juices will be taxed at 12%. The highest tax for consumables applied for carbonated drinks and tobacco which will be taxed at 28%. The response has been mixed with small business owners feeling uncertain about how much they should charge for the final price since there are different tax level for different things. However big manufacturers such as Colgate-Palmolive India welcomed the new scheme since it cuts multiple taxes. The company saw rise in their Colgate toothpaste sales after the toothpaste was charged at 18% national tax compared with 22%-26% levies and state tax earlier.

According to RFi Group data, the consumer sentiment in India has been declining in the past six months. The demonetisation followed by the new tax scheme could explain this sentiment. It may take few more months to restore the sentiment.

"The Consumer Sentiment in India has been declining in the past six months. The demonetisation followed by the new tax scheme could explain this sentiment."

 

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