A majority of the items from the consumer durables sector are likely to be taxed at 28 per cent under the final goods and services tax rates that were announced on Thursday.
According to industry experts, some of the items -- belonging to the lower price bands -- might be taxed at 18 per cent, considering their mass nature.
While Finance Minister Arun Jaitley on Thursday announced the tax slabs for all products and services in the country, he did not specify the items under each of the four tax slabs -- five, 12, 18 and 28 per cent.
Currently, a majority of the while goods are taxed at 26-31 per cent rate, depending on their nature and usage. Products such as laptops and personal computers will fall under similar tax slab, which might increase their prices marginally, if manufacturers decide to pass on the additional tax burden.
Mobile handsets assembled in India, especially smart phones, are taxed much lower at present. A majority of the large vendors have opened facilities here to avail various tax sops provided by the central government through the modified special incentive package scheme and by local authorities. The tax rates for such devices could be kept below 18 per cent.
Mixed bag for FMCG
Viveat Susan Pinto
Fast-moving consumer goods companies have begun assessing the impact of the rate structure declared on Thursday under the goods and services tax.
Finance Minister Arun Jaitley, who heads the GST Council, said a four-tier structure of five per cent, 12 per cent, 18 per cent and 28 per cent would be in place as part of the new tax regime that will kick in next year.
While mass-market home, personal care and food products are expected to fall in the five per cent bracket, premium products would come under the 28 per cent one, which could come as a dampener for companies which have been premiumising their portfolios.
“The rates are on expected lines except for 28 per cent, which came as a surprise. Most were anticipating 26 per cent,” said Sunil Duggal, CEO of Dabur India.
The 12 and 18 per cent tax rates have been declared as standard rates, which could see mid-priced products across the FMCG spectrum from soap to detergent and hair oil to toothpaste fall in these brackets. Foodgrains and essential items such as milk will not attract a duty in the new regime, tax experts said.
However, liquid detergents, hair conditioners, body wash, hair colour, premium chocolates and processed foods might attract a 28 per cent duty. Aerated drinks and pan masala will also attract a 28 per cent duty with an additional cess.
