GST Council revises tax rates for 66 items
New Delhi: The GST Council on Sunday decided to revise tax rates on 66 products and widened the scope of a concessional tax payment scheme for small businesses and restaurants.
Accordingly, tax rates on cashew and packaged food items such as pickle, instant food mixes and sauces will fall. Taxes on school bags, insulin, cutlery, ball bearings and computer printers were also lowered from the levels decided at the council’s meeting held in Srinagar in May.
Finance minister Arun Jaitley said the council went an extra mile to lower the tax burden on many of these items even below the level of tax burden on them currently, taking into account changing consumption patterns and economic realities. The tax burden on some of these items was historically high, he said. The council had received proposals seeking relief on 133 items.
Jaitley, however, hinted that the GST rate on hybrid cars will not be reviewed. The environment-friendly hybrid cars will attract a 15% cess over and above the 28% GST rate, the same rate levied on large luxury cars and sport utility vehicles.
The scope of the composition scheme, a presumptive taxation scheme allowing small traders, manufacturers and restaurants to pay a 1-5% GST rate on total sales without tax credits, has been widened to include assessees up to a turnover of Rs75 lakh from the Rs50 lakh ceiling fixed earlier. This will allow more small businesses to avail of a hassle-free compliance regime. Under this scheme, eligible traders can pay a tax of 1% of sales, while manufacturers can pay 2% and restaurants 5%, the same rates set earlier. The scheme was expanded as these segments are large job creators, a priority area for the government.
Pratik Jain, partner and leader, indirect tax, PwC India, said raising the scheme’s limit will provide relief to many more small businesses, although service providers (except restaurants) continue to remain outside its ambit.
Despite recent calls from West Bengal finance minister Amit Mitra to defer GST implementation, the council decided to go ahead with the planned 1 July rollout. The council will meet again on 18 June to take stock of the rollout preparedness and any new proposal from states.
Mitra on Sunday toned down his demand. When asked about West Bengal’s readiness for the rollout, Mitra said, “Let us see. There is still one more meeting of the GST Council for assessing the preparedness. Whenever we are prepared fully to our satisfaction, everybody feels comfortable, we can go ahead.” He added that the tax reform cannot be implemented in an ad hoc manner and that deferring implementation by a month will be helpful.
The overall weighted average of all tax rates decided by the council is much lower than the rates people pay today, said Jaitley. “Therefore, there will be an adverse revenue impact if other things remain equal. But we are also hoping for revenue buoyancy and a check on inflation that GST will ensure so as to make up for that loss,” said the minister.
Tax rate on job works was lowered to facilitate outsourcing of business activities. Tax rate on movie tickets costing less than Rs100 is likely to come down.
Jaitley said that reducing the tax rate entailed a revenue impact for the government, but lower tax incidence could help improve tax buoyancy and keep inflation low.
Tax rate on lottery services and the mechanism for checking profiteering among businesses during the transition period will be discussed at the next meeting. Jaitley said the rates decided so far “are broadly final”, but the council will be open to considering any new issue that may come to its notice.