The Goods and Services Tax Council at its 31st meeting in New Delhi on 22 December 2018 decided to reduce GST rates on 23 items, including 17 goods and six services, thus bringing 99 per cent items under GST in the low or nil tax brackets.
GST rates on 23 commonly used items have been reduced from 18 per cent to 12 and 5 per cent, respectively, in a fresh rate rationalisation attempt to streamline GST and make it more people-friendly. Many items including television, computers and auto parts will be cheaper now.
The proposed GST rate reduction will have an overall impact on revenue of Rs5,500 crore, union finance minister Arun Jaitley said after the meeting.
He said the new return filing system will be introduced on trial basis from 1 April, to be implemented mandatorily by 1 July, while the due date for GST annual return and audit report extended till 30 June 2019.
The decisions were taken after nearly two hours of debate on the issue with state governments led by opposition parties, especially the congress, supporting the view that the failure of an upward trend in revenue collection under GST should be taken into account before suggesting rate cuts.
The stance of the opposition parties led by Puducherry chief minister V Narayanasamy was contrary to political stance taken by the Congress party which had been batting for rates to be capped at 18 per cent.
Union finance minister Arun Jaitley, however, reminded the states that the strength of the decisions taken by the GST Council over its numerous meetings was that none of the items came to a vote and that all were agreed to unanimously.
Finally, the GST Council decided to cut rates on 17 items and six services. This left only one common use item, cement, in the 28 per cent category.
Jaitley said the revenue impact of cutting the tax rate on cement was such that the Council decided to take a call on it only once revenues showed stronger growth.
GST rate reduction on goods:
28% to 18%: Pulleys, transmission shafts and cranks, gear boxes etc., falling under HS Code 8483, Monitors and TVs of up to 32 inches screen size, Re-treaded or used pneumatic tyres of rubber, Power banks of lithium ion batteries. (Lithium ion batteries are already at 18 per cent. This will bring parity in GST rate of power bank and lithium ion battery), Digital cameras and video camera recorders, Video game consoles and other games and sports requisites falling under HS code 9504.
18% to 12%: Cork roughly squared or debagged, Articles of natural cork, Agglomerated cork.
28% to 5%: Parts and accessories for the carriages for disabled persons.
18% to 5%: Marble rubble
12% to 5%: Natural cork, walking stick, fly ash blocks.
12% to Nil: Music books
5% to Nil: Vegetables, (uncooked or cooked by steaming or boiling in water), frozen, branded and put in a unit container; Vegetable provisionally preserved (for example by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), but unsuitable in that state for immediate consumption.
Supply of gold by nominated agencies to exporters of article of gold jewellery has been exempted from GST.
Proceeds received by government from auction of gifts received by President, prime minister, governor or chief minister of a state and public servants, the proceeds of which is used for public or charitable cause, has also been exempted from GST.
Likewise, vehicles imported for temporary purposes under the customs convention on the temporary importation of private road vehicles (carnet de passages-en-douane), has been exempted from IGST/compensation cess.
The 5 per cent/18 per cent GST rates to be applied on footwear items will be based on the transaction value.
There will be a uniform GST rate of 12 per cent on flexible intermediate bulk container (FIBC) against the existing 5 per cent/12 per cent (depending on the value).
GST rate of 5 per cent has been prescribed on renewable energy devices and parts for their manufacture (bio gas plant/solar power based devices, solar power generating system (SGPS) etc) [falling under chapter 84, 85 or 94 of the tariff].
Certain disputes have arisen regarding GST rates where specified goods attracting 5 per cent GST are supplied along with services of construction etc and other goods for solar power plant.
To resolve the dispute the Council has recommended that in all such cases, the 70 per cent of the gross value shall be deemed as the value of supply of said goods attracting 5 per cent rate and the remaining portion (30 per cent) of the aggregate value of such EPC contract shall be deemed as the value of supply of taxable service attracting standard GST rate.
Reduction in GST rates/exemptions on services:
GST rate on cinema tickets above Rs100 will be reduced from 28 per cent to 18 per cent and on cinema tickets up to Rs100 from 18 per cent to 12 per cent.
GST rate on third party insurance premium of goods carrying vehicles shall be reduced from 18 per cent to 12 per cent.
Services supplied by banks to basic saving bank deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) shall be exempted from GST.
Air travel of pilgrims by non-scheduled/charter operations, for religious pilgrimage facilitated by the Government of India under bilateral arrangements shall attract the same rate of GST as applicable to similar flights in economy class (ie, 5 per cent with ITC of input services).
The GSY Council also made the following clarifications:
Items like sprinkler system consisting of nozzles, lateral and other components would attract 12 per cent GST rate.
Movement of rigs, tools and spares and all goods on wheels on own account where such movement is not intended for further supply of such goods but for the provision of service does not involve a supply (eg, movement of testing equipment etc) is not be liable to GST.
Goods with description Bagasse Board (whether plain or laminated) falling under Chapter 44 will attract GST at the rate of 12 per cent.
Concessional GST rate of 5 per cent is applicable to LPG supplied in bulk to an OMC by refiners/fractioners for bottling for further supply to household domestic consumers.
While animal/cattle/aquatic/poultry feed are exempt from GST, this exemption would not apply to their inputs such as fish meal, meat bone meal, bran, sharps, oil cakes of various oil seeds etc.
Polypropylene woven and non-woven bags and PP woven and non-woven bags laminated with BOPP falls under HS code 3923 and attract 18 per cent GST rate.
18 per cent GST is applicable on wood logs, including the wood in rough/log used for pulping.
Turbo charger is classified under heading 8414 and attracts 18 per cent GST and not 5 per cent GST.
Fabric even if embroidered or has stitching of lace and tikki etc, and even if sold in three piece fabric as ladies suit set, will be classifiable as fabric and would attract 5 per cent GST.
There is scope of concessional rate of 5 per cent GST rate for specified equipment for waste to energy plant.
The GST Council at its meeting also in principle approved the creation of a Centralised Appellate Authority for Advance Ruling (AAAR) to deal with cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities on the same issue.
It also decided to amend section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit, ie, interest would be leviable only on the amount payable through the electronic cash ledger.
The above recommendations of the council will be made effective only after the necessary amendments in the GST Acts are carried out.