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Government likely to slash GST rates on white goods

Home appliances like washing machines, refrigerators, air conditioners among other items are set to become cheaper as the government is reportedly considering slashing down the GST rates on white goods.

At present the above mentioned items come under the 28% tax slab of the Goods and Services Tax Bill.

The move to cut down the rates has been aimed to push the demand in sector amid the slowdown.

A senior official was quoted by Economic Times saying that the move is expected to help push demand in the sector, amid repeated complaints of a slowdown and excess capacity.

The official added that a part of the reason for a lower levy on restaurants was also to free women from household chores, which begin with packing lunch for children in the morning and extend till late at night.

Meanwhile, contrasting to the above buzz, eating out isn’t getting cheaper post the reduced goods and services tax (GST) rate of 5% for air-conditioned (AC) and non-AC restaurants that got implemented last week.

That’s because not every restaurant company is passing on the benefits of reduced tax rate to customers, at least not completely.

For instance, during the 18% GST regime, a regular Latte at a McCafe coffee chain in Mumbai was priced at Rs 142 including 18% GST i.e. Rs 120.34 (base rate for the coffee beverage, as per invoice) + Rs 10.83 (9% CGST, as per invoice) + Rs 10.83 (9% SGST, as per invoice). With the tax rate coming down to 5% now, the price of this coffee beverage should have reduced by Rs 15.60 to Rs 126 i.e. Rs 120.34 (taking the same base rate for the coffee beverage) + Rs 3 (2.5%, CGST) + Rs 3 (2.5%, SGST).

That’s because McCafe continues to charge its customers, the same amount of Rs 142 for a regular Latte at its outlets. How does Westlife Development Ltd (WDL), the master franchisee of McDonald’s Restaurants in west and south India, achieve this?

Instead of keeping the base price of the coffee beverage at Rs 120.34, the quick service restaurant (QSR) chain increases its price to Rs 135.24 and adds 5% tax – Rs 3.38 (2.5% CGST) + Rs 3.38 (2.5% SGST) – taking the total to Rs 142 and pocketing the difference of Rs 16 (Rs 142 – Rs 126).

When inquired, WDL spokesperson said, “The government has brought down GST from 18% to 5%, but there has been a removal of input tax credit (ITC). Due to this, our operating costs have gone up by 10-12%. However, at McDonald’s, we believe in giving the best value to our customers, and have passed on the benefits wherever we could.”