Finalising tax rates for six pending items including gold, biscuits, packaged and branded cereals and flour, the Goods and Services Tax (GST) Council, at its fifteenth meeting on Saturday, decided to lower tax incidence on footwear, textiles and apparels below Rs 1,000. The Council, however, decided to set a higher taxation rate of 3 per cent on gold and gold jewellery, making them slightly more expensive from July 1.
The Council, with representatives of states and Centre, also agreed on the July 1 rollout for the indirect tax regime. West Bengal was the exception — its Finance Minister Amit Mitra said the rollout of GST from July 1 would have “serious problems” and there was no harm in delaying its implementation by a month.
Asked about Mitra’s demand to delay the rollout, Finance Minister Arun Jaitley said, “Others did not share the view. We are quite confident of being able to stick to the target date,” he said.
The Council decided to tax footwear below Rs 500 at 5 per cent under the GST, while the rest would be taxed at 18 per cent. Made-up apparels below Rs 1,000 will be taxed at 5 per cent, while those priced above Rs 1,000 will be taxed at 12 per cent.
Under the textiles category, the Council decided to tax all types of fabric at 5 per cent from the current total tax incidence of around 18 per cent. Silk and jute fibres will continue to be tax exempt, while other natural fibres including cotton will be taxed at 5 per cent. Manmade yarn and fibres, however, will be taxed at a higher rate of 18 per cent.
Biscuits will be taxed at a flat rate of 18 per cent as against the current tax incidence (including octroi) of 20.6 per cent for biscuits below Rs 100 per kg and 23.11 per cent for other biscuits.
Gold and gold jewellery will be taxed at 3 per cent, while rough diamonds will attract a tax of 0.25 per cent under the indirect tax regime. At present, gold jewellery has total tax incidence of 2 per cent, with an excise duty of 1 per cent, without CENVAT credit and VAT rates for most states at 1 per cent except Kerala (5 per cent), Maharashtra (1.2 per cent) and Tripura (2 per cent). VAT rates of states on diamonds and precious stones are the same as that for jewellery, except Gujarat, where there is no VAT for rough diamonds.
Bidis will be taxed at the highest rate of 28 per cent, with no levy of cess, while bidi wrapper (tendu) leaves will be taxed at 18 per cent. At present, the average total tax incidence on bidi is 25.68 per cent, while that on tendu leaves is 8.41 per cent with octroi. The GST rate recommended by the fitment committee was 5 per cent, but Madhya Pradesh, a major manufacturer of tendu leaves, had suggested a rate of 28 per cent.
Packaged cereals and flour with registered trademarks will be taxed at 5 per cent from no tax at present. In the previous GST Council meeting, it was decided to levy no tax on unbranded flour. On Saturday, Council members were also apprised about the variation in retail prices of branded cereals, pulses and flour. The average retail price of wheat flour, as per Department of Consumer Affairs, is Rs 24.51 per kg, while prices of branded wheat flour by various companies range from Rs 33-58 per kg. For branded rice, the retail prices range from Rs 79 per kg to Rs 88 per kg.
It was also decided to tax agricultural equipments under two tax slabs of 5 per cent and 12 per cent. Under GST, agricultural and horticultural machinery will be taxed at 12 per cent as against the present tax incidence of 13.79 per cent (with octroi), while cleaning/sorting/grading/milling machinery will be taxed at 5 per cent from present tax incidence of 8.79 per cent (with octroi).
The Council also clarified the definition of puja samagri which has been exempted under the GST regime to include rudraksha, sacred thread, wooden khadau, unbranded honey, panchamrit and diya wick. Despite appeals by the manufacturers of agarbatti or incense sticks, on which a 12 per cent tax has been proposed, the Council decided against exempting agarbattis.
The Council had fitted over 1,200 goods and 500 services in the tax bracket of 5, 12, 18 and 28 per cent last month, but had kept six items and two rules pending for approval. On Saturday, the Council approved the two pending draft rules pertaining to transition and returns. It decided to amend the transition rules allowing traders and retailers to get 60 per cent of deemed credit for CGST/SGST payable where the tax rate exceeds 18 per cent. For tax rate below 18 per cent, it will be retained at 40 per cent.
The draft transition law provided that once GST is implemented, a company can claim credit of up to 40 per cent of their Central GST dues for excise duty paid on stock held by businesses prior to the rollout.
Revenue Secretary Hasmukh Adhia said for transition stock, the government will refund 100 per cent excise duty for goods valued above Rs 25,000 and goods bearing the brand name of the manufacturer and having a serial number such as chassis number for TV, fridge, or cars.
“On all those items, even if it is coming through the dealer, the manufacturer will give the credit transfer document to the distributor and the distributor will be able to take 100 per cent credit for the big ticket items,” Adhia said.
With regard to Canteen Stores Department (CSD) canteen, Jaitley said to maintain the current price levels, half the taxation benefit will be maintained.
The Council also agreed to set up a Committee comprising officials from Centre and states to look into the complaints with regard to the anti-profiteering clause that seeks to prevent companies from making undue gains post GST rollout, Jaitley said.
The next Council meeting will be on June 11 wherein it will take up the tax rate for lottery and other pending rules of e-way bill and accounts and records.