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New Delhi: Federal tax body, the goods and service tax (GST) council chaired by finance minister Arun Jaitley, on Saturday resolved to firmly deal with businesses that do not pass on the benefit of reduced tax burden arising from the indirect tax reform to consumers.

The council at its 20th meeting held in the capital also made some adjustments in tax rates including on work outsourced by the synthetic textile industry as well as the central and state governments.

Jaitley told reporters after the meeting that the anti-profiteering provision in the GST law was discussed at length by the council members. “There are industries which have not passed on the benefit of higher input tax credit in the GST regime to consumers. We desire that market forces compel these industries to give this benefit to consumers at large," said the minister without identifying the sectors.

Revenue secretary Hasmukh Adhia, who was present on the occasion, later told reporters that the government will hold more awareness campaigns for the benefit of traders and businesses while preparing for implementing the deterrent provisions in the law. “Monitoring committees at central and state level will be set up in the next 15 days," said Adhia. These panels will examine instances of profiteering.

The council cut the tax rate on job works that the synthetic textile industry gets done from smaller entities to 5% from the earlier 18%, equating it to the rate applicable on similar work that cotton mills outsource to other players.

The council will implement the e-way bill system, an electronic permit that businesses and traders have to secure for transporting goods beyond 10km, from 1 October. Consignments worth up to Rs50,000 are exempt from securing e-way bills. The council, which contemplated raising this threshold, eventually decided to keep it unchanged as many states objected to it saying it might lead to tax evasion.

“We want smooth flow of goods. The process will be technology driven with minimum human intervention," Jaitley said. State tax administrations have already dismantled their border check posts.

Job works that central and state governments get done from contractors will be taxed at 12%, down from the earlier 18%, with facility for claiming credit for taxes paid on raw materials. Some states demanded that this should be lowered to 5%, a suggestion the council will consider in due course.

The tax rate on some tractor parts are reduced from 28% to 18%. The council will meet next on 9 September in Hyderabad, Jaitley added.

Taxi aggregators, who are taxed at 5%, will get the option to pay 12% tax with input tax credit so that the taxes paid on office equipment and other expenses could be used to offset the tax liability on the service they give to consumers. This option was given on the demand from the industry.

The introduction of GST from 1 July has led to an expansion of tax base. Jaitley said that more than 7.1 million out of the eight million registered tax payers in the earlier regime have so far migrated to GST, while new applications have touched 1.6 million.

Divyesh Lapsiwala, tax partner, EY said rationalisation of rates in certain products showed the government was focused on receiving feedback from the industry and was open to making changes so that the regulation was more acceptable to trade.

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