GST Council Cuts Rates For 66 Categories And Spares Several Small Enterprises
The 16th GST Council meeting resulted in lower GST rates for certain categories and relief for small traders, manufacturers and restaurants.
In two big concessions the Goods and Service Tax (GST) Council has announced relief for small and medium enterprises in trading and manufacturing and for restaurants, and reduced the previously determined GST rates on 66 categories.
Finance Minister Arun Jaitley, speaking to the media in a briefing after the 16th GST Council meeting this Sunday, said that 133 industry representations were received after the rates were announced in previous council meetings. These were considered by the council at length with the objective to maintain equivalence - that is, to keep the GST rates close to current effective tax rates.
GST Rates Lowered For 66 Categories
After consideration the council has decided to reduce the GST rate applicable to 66 categories including cashew nuts, pickles, ketchup, agarbattis, children’s drawing books, insulin, tractor components and others.
A full list has yet to be shared by the GST Council or government but the minister did share some of the revisions.
Tax experts have welcomed the rate revisions. “The GST Council has shown its continued willingness to reconsider, which is heartening,” said Harishanker Subramaniam, the national leader of indirect tax at EY India, in an emailed comment.
Harpreet Singh, indirect-tax partner at KPMG in India, said the GST Council’s decisions will “have a positive impact on various sectors like textiles, education, entertainment etc.”
Insulin, Cashew Nuts, Agarbattis
The GST rate on cashew nuts, agarbattis and insulin has been reduced from 12 percent to 5 percent.
Well, a downward revision is always welcome from 12 percent to 5 percent but I do believe that chronic therapies like insulin and for diseases like cancer, these drugs be exempt from GST altogether because patients do need lot of help in terms of drug prices. And this would have been a very, very welcome development if he would have actually exempted such drugs from GST altogether.Kiran Mazumdar-Shaw, Chairman and Managing Director, Biocon
Tractor Components
The GST rate on tractor components has been revised lower, from 28 percent to 18 percent.
“This is good news,” said VS Parthasarthy, group chief financial officer at Mahindra & Mahindra to BloombergQuint. “That you take out any pain points that are there in the transitioning since tractors were already at 18 percent.”
It is good for the Industry and in-line with industry’s demand. The rate of 28 percent would have led to an inverted duty structure given that output rate was only 12 percent and input rate was 19 percent. A GST rate of 28 percent would have added to the cost of the industry. However, the revised 18 percent will lead to saving on working capital and cash flow for the industry. This will balance out input and output tax liabilities.Bharat Madan, Chief Financial Officer, Escorts
Children’s Books
While the finance minister announced a GST rate reduction - from 12 percent to nil - for children’s drawing books, a leading manufacturer remains unenthused. Navneet Education’s Managing Director, Gnanesh Gala, told BloombergQuint that’s because the current tax rate is nil.
He expects to take a price hike on other educational books.
The rates for exercise, text books and drawing books have been reduced to 12 percent from 18 percent earlier. However, this is still higher than the VAT of 5 percent that the industry was paying earlier. Consequently, we expect to take a price hike to the extent of 3 percent (maximum) for these products with effect from October, i.e. start of the next manufacturing cycle. Textbooks contribute to 20 percent of the company’s overall revenue, while drawing books contribute to 10 percent of the overall revenue.Gnanesh Gala, Managing Director, Navneet Education
Cinema Tickets
The GST rate on cinema tickets has also been revised.
- For tickets priced at Rs 100 or below the rate will be 18 percent.
- For tickets priced above Rs 100 the rate will be 28 percent.
Composition Scheme Relief For Small Enterprises
Jaitley also announced a concession for several small and medium enterprises that will be taxed via the Composition Scheme.
So far the GST Council had formulated a Composition Scheme, the upper limit of which was Rs 50 lakh. Enterprises earning a revenue/turnover below that were liable to pay a GST rate on turnover - 1 percent in the case of trading, 2 percent for manfacturing and 5 percent for restaurants.
While the rates have been maintained the GST Council has raised the composition amount (threshold level) to Rs 75 lakh.
Jaitley said this was done with two objectives.
One, to maintain revenue neutrality to the extent possible but ease the burden on SMEs, and also reduce the burden on these three categories which are mass job creators.Arun Jaitley, Finance Minister
Jaitley also announced that, in order to encourage outsourcing of work, the GST rate for job workers has been fixed at 5 percent. This applies to books, leather, gems and jewellery, textiles etc...
The GST Council also approved the accounts and records rule today. This was on the agenda and hence an expected decision. But there was no word on the E-way Bill rule, that was also expected to be approved today.
The finance minister made no mention of any further progess on the structure and processes of the anti-profiteering body, to be set up to ensure that companies pass on to consumers any cost benefit arising from GST implementation and the accompanying input credits. But Revenue Secretary Hasmukh Adhia said that draft rules had been formulated.
The GST Council decided to revisit the GST rate on hybrid vehicles in its next meeting, said Kerala finance minister Thomas Isaac.
This meeting comes barely three weeks before the implementation of GST, the date for which is July 1. The next GST Council meeting has been fixed for June 18.
Although, the representations on rates have been reciprocated, the council needs to now accept the additional time needed by industry to prepare, as many are yet to gear-up from a systems standpoint - ie: invoicing, maintaining GST registers and filing returns on day 40th from July 1. Consequently, the council should think of innovative means to comfort the industry, by voicing that revision would be allowed for a quarter without any penal consequences, and it would put all the concerns to rest.Suresh Rohira, Partner, Grant Thornton India