Tag: taxes

Council raises GST on low-cost footwear, garments to 12%

In its first physical meeting in two years, the GST Council on Friday effected several long-pending tweaks in tax rates including an increase in the GST levied on footwear costing less than ₹1,000 as well as readymade garments and fabrics to 12% from 5%.

The new rates on these products, a decision on which had been deferred by the Council over the past year owing to the pandemic’s impact on households, will come into effect from January 1, Finance Minister Nirmala Sitharaman said.

The Council approved a special composition scheme for brick kilns with a turnover threshold of ₹20 lakh, from April 1, 2022. Bricks would attract GST at the rate of 6% without input tax credits under the scheme, or 12% with input credits.

While this will please States like Uttar Pradesh that had sought a special scheme for brick kilns, a decision on extending such a scheme for other evasion-prone sectors like pan masala, gutkha and sand mining was put off.


The Council also decided to extend the concessional tax rates granted for COVID-19 medicines like Amphotericin B and Remdesivir till December 31, but similar sops offered by the Council at its last meeting in June for equipment like oxygen concentrators will expire on September 30.

The GST rate on seven more drugs useful for COVID-19 patients has been slashed till December 31 to 5% from 12%, including Itolizumab, Posaconazole and Favipiravir. The GST rate on Keytruda medicine for treatment of cancer has been reduced from 12% to 5%.

Life-saving drugs Zolgensma and Viltepso used in the treatment of spinal muscular atrophy, particularly for children, has been exempted from GST when imported for personal use. These medicines cost about ₹16 crore, Ms. Sitharaman said.

Food delivery tax shift
The Council also decided to make food delivery apps like Swiggy and Zomato liable to collect and remit the taxes on food orders, as opposed to the current system where restaurants providing the food remit the tax.

Revenue Secretary Tarun Bajaj stressed this did not constitute a new or extra tax, just the tax that was payable by restaurants would now be paid by aggregators. Some restaurants were avoiding paying the GST even though it was billed to customers.

“The decision to make food aggregators pay tax on supplies made by restaurants from January 1, 2022, seems to have been done based on empirical data of under reporting by restaurants, despite having collected tax on supplies of food to customers,” said Mahesh Jaising, Partner, Deloitte India.

“The impact on the end consumer is expected to be neutral where the restaurant is a registered one. For those supplies from unregistered, there could be a 5% GST going forward,” he added.

Aircraft on lease
The GST Council has exempted Integrated GST levied on import of aircraft on lease basis. This will help the aviation industry avoid double taxation, the Finance Minister said, and will also be granted for aircraft lessors who are located in Special Economic Zones.

Goods supplied at Indo-Bangladesh border haats have also been exempted from GST.

Written by: Ananya Kaushal

ECONOMICS OF MONEY

HOW MONEY ORIGINATED?

            Money is neither invented nor discovered. It evolved over years. Several centuries ago, there existed a system named the barter system. The barter system is the system where the goods and services are exchanged with each other. For example, If a person says X sells vegetable to another person Y, then the person Y have to sell fruits to the person X. Thus they exchanged goods between them. As time evolves, yellow metal and paper currency was used by the people. The yellow metal is nothing but gold, silver. In this system, the people used gold and silver to buy goods and commodities. As time evolves, the government has said that no need to use gold metals and they will issue notes, i.e, currencies with the value written on them. The government has ordered everyone to use and accept this. As long as people trust the system introduced by the government, paper currency is available. This is how money evolved over a while. Today, there are multiple forms of money. They are credit cards, debit cards, mobile banking, electronic wallets.

HOW DO WE SPEND MONEY?

            There are five forms of spending. They are needs, wants necessities, comforts, and luxuries.

NEEDS: Needs are the things that you must require at that time. Some of the common needs of a man are food, clothing, shelter, transport, communication, education. For example, as a college student, you need to have a phone since many study materials have been sent to your devices.

WANTS: Wants are the thing that you desire to have. Unlike needs, wants have options to choose from. If you do not have those things, it will not affect you. For example, well-furnished home, time-saving home devices, AC rooms, etc.,

NECESSITIES: Necessities have been categorized into three types: 

  • Necessities for life: This includes the basic things you need to run life on earth. Example: Food, clothing, and shelter.
  • Necessities for efficiency: This includes the bike for college students, a car for a businessman.
  • Conventional necessities: It is a social habit of practicing some habits. For example, people spend more money on wedding receptions.

COMFORTS: Comforts are the things that make life more enjoyable. The examples include a Well-furnished home, AC bedrooms, etc.,

LUXURIES: Luxuries represents the higher strata of spending. For example: Having a BMW car, buying diamonds.

       The important point is that needs and wants change with time. For instance, when you are a college student, having a Macbook pro is want. But when you are in the corporate world, having a Macbook pro becomes the need. Necessities, comforts, and luxuries will also differ from time to time and people to people. In the 1990s having a phone is a luxury, in 2000 having a phone is comfort and now it is a necessity to have a phone.

TAX, SAVINGS, AND INVESTMENT:

TAX: The part of our earnings has to be paid to the government in a form of taxes. The reason why we have to pay the taxes is that the government sets up the environment for our earnings. Taxes enable the government to maintain the city infrastructure by providing good roads, hospitals, and transports. To be a good citizen, we must pay the taxes honestly. The tax rate will be increased if some of the people are not paying their taxes properly. Once we paid the tax, then that money will be the government’s money. There are two types of taxes namely direct tax (income tax) and indirect tax (GST).

SAVINGS: Savings is the money that remains after you spend the money from your earnings. You can put your money in a savings bank account. The money in your account will be safe. The ability to convert them into cash is high. The rate of risk is low in a savings account. If you need money within one year, then put the money in a savings account. The ideal equation is INCOME-SAVINGS=EXPENSE.

INVESTMENT: You can invest the money in bank deposits, mutual funds, equity shares, fixed deposits, gold. The return of the money will be higher or lower. The risk of losing money varies by the investment you made. It is a long-term process generally more than 2 years. The liquidity depends on the type of investment. If you want to need the money a few years later, then invest the money.