GST rate cuts notified by Centre, effective Sept 22, companies prepare for simplified structure

The Centre on Wednesday notified the new rates for the goods and services tax (GST), which will be effective from September 22.  The notification by the finance ministry comes following the recommendations of the GST Council in its 56th meeting on September 3 and supersedes the notification of June 28, 2017.

With this, the Centre has taken forward a crucial step to give effect to the rate cuts under GST. Each of the states will also come up with separate notifications for implementing the new rates under the State GST over the next few days.

The GST Council in the meeting on September 3 had recommended two main rates of 5% and 18% doing away with the 12% and 28% rate under the indirect tax levy. It has also recommended a higher rate of 40% for sin and luxury goods and the compensation cess will come to an end.

The Central Board of Indirect Taxes (CBIC) has also been working with industry and stakeholders to ease transition issues and provide clarifications on various issues while the government has also made the required notifications for relabelling of new prices.

Meanwhile, industry has been working on strategies to pass through the tax cuts to consumers and also comply with the new tax norms.

Experts note that now with the rate notifications released, it is imperative for industries to align their ERP systems, pricing decisions and supply chain.

“This strategic alignment is critical to ensure a smooth implementation and, crucially, to guarantee that the benefits of this rate rationalisation are effectively passed on to the end consumer,” said Saurabh Agarwal, Tax Partner, EY.