The Goods and Services Tax (GST) Council Sunday revised downward tax rates for 66 items including movie tickets of Rs 100 and below, incense sticks, insulin, school bags, computer printers — 133 items were considered for review at the sixteenth meeting of the Council. Relief was also given to small and medium enterprises, with the threshold for composition scheme raised to Rs 75 lakh from the earlier decided level of Rs 50 lakh.
The composition scheme, with a flat 1 per cent tax rate for traders, 2 per cent for manufacturers and 5 per cent for restaurants with a cut-off of annual turnover of up to Rs 50 lakh, provides for a simpler method of calculating tax liability for registered dealers with turnover below the compounding cut-off to reduce the administration cost associated with collection of tax from small traders. However, those who opt for the scheme will not be eligible for input tax credit.
Finance Minister Arun Jaitley said the revision in GST rates was considered after receiving several representations from trade and industry.
“The objective was to maintain equivalence to the existing taxation level and, in some cases, the fitment committee’s recommendation went beyond the equivalence principle. Because some items have been historically charged at a higher rate… but today, in the changed economic concept, the burden requires to be reduced. So, after considering the recommendations, the GST Council has reduced the tax levels in 66 out of 133 cases,” he said.
“There were two objectives behind this. One, we tried to maintain revenue neutrality to the extent possible because this can also mean some loss of revenue but it eases the burden on SMEs and small traders, restaurants. And it also reduces the burden on these three categories because these are mass job creators. So that is why, after detailed discussions, this (threshold for composition scheme) was increased to Rs 75 lakh,” he said.
On the targeted date for GST rollout, officials said July 1 date stays.
“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 when he was asked about some traders protesting against the July 1 rollout date.
West Bengal Finance Minister Amit Mitra said: “July 1 looks extremely difficult. But you cannot be doing jugaad for the world’s largest fiscal reform called GST. Small businesses have to fill up spreadsheets which then has to go through a software process to get uplinked… so let us be sure, Mahabharat ashuddh nahi ho jayega if you postpone by one month or so.”
The tax rate on certain packaged food items like pickles, mustard sauce, murabba, ketchup has been reduced to 12 per cent from the earlier decided 18 per cent, while that on cashew nuts has been cut to 5 per cent from 12 per cent.
The GST rate for entertainment has been split into two categories, with movie tickets below Rs 100 now proposed to be taxed at 18 per cent, while those above will continue to be taxed at 28 per cent.
The Council also exempted children’s picture, drawing books from 12 per cent proposed earlier, while lowering that for computer printers to 18 per cent from 28 per cent.
School bags will attract tax of 18 per cent as against 28 per cent proposed earlier. Tax rate on kajal has been lowered to 18 per cent from 28 per cent. The GST rate on cutlery has been reduced to 12 per cent from 18 per cent, while that for some tractor components, plastic beads and plastic tarpaulins has been cut to 18 per cent from 28 per cent.
Also, the tax rate for job work for textiles, diamond processing, leather, jewellery and printing was reduced to 5 per cent from 18 per cent. “These are items where job workers typically take the work home, and work on textile or diamond processing or jewellery work. Now the normal GST rate for these services is 18 per cent but because in these sectors the rate itself has been reduced, for job work in these sectors the rate has been fixed at 5 per cent, so that outsourcing through job work in these sectors could be encouraged,” Jaitley said.
The draft rules for accounts and records were also approved at the meeting. The approved version of the rule has done away with the need for a registered person to provide, on demand, account of the audit trail and interlinkages including source document, record layout and explanation for codes used and total number of records in each field along with sample copies of documents as was proposed earlier.
The next meeting of the Council will be on June 18, which will take up lottery taxes and e-way bill and any other issue which may come up, Jaitley said.
On the issue of review of GST rate on hybrid cars, a detailed paper will be circulated and, after taking comments from states, it will be taken up by the Council later, if necessary, Jaitley said.