The international meaning of zero-rated goods and supplies has been wantonly throttled. Products meant for disabled citizens need to be part of zero-rated supplies – where GST rate is zero AND input tax credit can be claimed.
What the Ministry of Finance, Government of India is proposing for people living with Disability in India is a rigmarole. Anita Rastogi, Partner, Indirect Tax, PwC India explains how and proposes a solution. In less than 4 minutes.
Less than 4 minutes is also the sum total of time Team Arun Jaitley has spent on thinking about tax burden on already overtaxed disabled citizens.
There are 2 issues here. One is of status and the other of process.
Firstly, the disability sector had exemption in both excise and VAT earlier. This all changed post GST and was taxed up to 18 percent. It was only after 2 state finance ministers wrote to the GST Council that they brought most products down to 5.
Check bit.ly/gst-lies-table for the dismaying before and after. We need the exemption status back without any complicated manoeuvres. Given the way politicians keep withdrawing support systems arbitrarily, it makes no sense to change the status just because the law has not been designed with full application of mind.
Secondly, input tax credit is tax paid at every stage from start to end. At the final stage, this accumulated, rightfully paid tax can be deducted from the total tax liability as IT IS ALREADY PAID.
In the earlier system there was a cascading tax effect with tax charged multiple times due to the many chaotic channels. GST’s unified channel does away with this redundancy with a clear chain of what has been paid and by whom. That enables the last link on the chain to deduct previously paid tax before paying final tax due.
This is the case across all products and is a benefit brought about by the system’s efficiency. What sense does it make to force the final tax payer to pay full cost without availing that rightfully prepaid benefit?