GST Council revises rates for 66 items

GST Council revises rates for 66 items

India's most comprehensive indirect tax reform — the goods and services tax (GST) — is inching towards a July 1 rollout with the GST Council cutting the rate on household goods and other essential items, raising the threshold for the scheme that requires lesser compliance and approving another key set of rules relating to audit and accounts.

At its meeting on Sunday in the Capital, the council revised rates on 66 items such as pickles, sauces, fruit preserves, insulin,  cashew nuts, insulin, school bags, colouring books, notebooks, printers, cutlery, agarbattis and cinema tickets, following representations from industry.

Restaurants, manufacturers and traders having a turnover of up to Rs 75 lakh can avail of the composition scheme with lower rates of 5%, 2% and 1%, respectively, with lower compliance, against Rs 50 lakh previously. A GST rate of 5% will be applicable on outsourcing of manufacturing or job work in textiles and the gems and  jewellery sector. Bleaching and cleaning of human hair, a big industry in Midnapore, will not face any tax.

"After considering recommendations of fitment committee, rates are being reduced in the case of 66 items," FM Arun Jaitley, who is also the chairman of the GST Council, told reporters."There were 133 representations... These were considered at length," Jaitley said.Revenue buoyancy and prices remaining in check will balance out the changes, it is hoped.

The weighted average of all the rates that we have decided is significantly lower than what we are paying today," he said, adding that therefore there would be an adverse revenue impact if other things remained equal. "But, we are also hoping on revenue buoyancy and a check on inflation that GST will ensure so as to make up for that loss."

A number of household items in the packaged food category that had been placed in the 18% bracket such as pickles, mustard sauce, ketchups, fruit preserves and sandwich toppings will now attract 12% GST.

The rate on agarbattis has been lowered to 5% from 12% proposed earlier. School bags will face a rate of 18% instead of 28%, exercise books will attract 12% instead of 18% and colouring books will be exempt instead of 12% proposed earlier. Steel cutlery will attract 12% instead of 18% and computer printers 18% instead of 28%. Fly ash bricks and blocks will attract 12%

Movie tickets costing below Rs 100 will now attract 18% GST while 28% will continue for those over Rs 100. "Consumers will benefit from the reduction in rates," Jaitley said, adding that states can refund state GST on regional cinema but there cannot be a centralised exemption.

Pratik Jain, leader, indirect taxes, PwC, said, "It's really encouraging that the government, in a short span of time, managed to consider all the industry representations on rates and reduced/realigned the rates on almost 50% of the items covered under those."

Asked about hybrid cars, Jaitley said it was decided that the council will take this up after considering states' views on a paper prepared on the subject. "The fact that is being projected, according to the paper, that is not correct," Jaitley said. GST was too high on such cars, according to the auto industry, acting as a dampener on an environment friendly segment

CHEER FOR SMES AND MANUFACTURERS

More entities will be able to take advantage of the composition scheme now with the changes in the threshold.Jaitley said the council has attempted to keep a revenue-neutral rate as also ease the burden on smaller enterprises.

"This should mean that a significant number of SME (small and medium enterprise) sector players should benefit from not having to meet with detailed compliances under GST and also having a less financial burden, on account of GST," said Mahesh Jaising, partner, indirect tax, BMR & Associates LLP.

For workers in industries such as textiles and, gems and jewellery, where they take work home, a GST rate of 5% will be charged instead of the 18% standard rate on outsourcing.

NEXT GST COUNCIL MEET ON JUNE 18

Jaitley said the council will now meet next Sunday in the Capital to finalise the remaining issues that include taxation of lotteries and eway bills, which relate to transport of goods across state lines. A committee of officials is also finalising the mechanism for the antiprofiteering law.

Revenue secretary Hasmukh Adhia said the attempt would be to complete the drafting of rules and report to the council.. "It can be any time, not necessarily linked to the rollout, but we will try and expedite it as early as possible," Adhia said.

GST, which seeks to replace multiple state and central taxes with a single levy, is proposed to be implemented from July 1. Some sections of industry have sought its deferral but the government is not keen to delay it any further.

"Irrespective of the date on which it starts, some people will say they are not ready, so they have no option but to get ready," Jaitley said.

Adhia said industry had also begun stock planning so the levy can be rolled out as scheduled. "The transition rules have been made so relaxed that nobody will have any issue of stocking or destocking. So we don't expect there will be any scarcity of any commodity in the market," Adhia said.

The council has agreed to allow additional verification facilities to enrol taxpayers on the GST Network  including the one-time password and banking verification.Some state finance ministers also want the rollout deferred.

"I have also added a caveat that July 1looks extremely difficult. It cannot be jugaad... Small business has to fill up a spreadsheet which then has to go through a software process to get uplinked," said West Bengal finance minister Amit Mitra. "According to reports, end of the month, these spreadsheets would be available for  uploading and you are going to start from July 1."

Tax experts also see difficulties in a July 1rollout."With potentially two more council meetings, we will be down to the wire for July 1 implementation," said Harishanker Subramaniam, national leader, indirect tax, EY India.

"The deferment of discussions to next Sunday around e-way bills is of concern to industry, as it would indeed be a tall task for industry to be prepared as on July 1,  if the same were to be made fully applicable on the start date," said BMR's Jaising.

The Economic Times, New Delhi, 24th November 2017