NEW DELHI: The Centre and states decided on Sunday to lower rates on 66 goods and services — from pickles and cheaper cinema tickets to insulin and instant food mixes — and also eased the compliance burden for small businesses as they raced to be ready to launch the goods and services tax from July 1.The GST Council, which met on Sunday, reduced the rates for nearly half the 133 items on which representations had been received, which included hybrid cars, sanitary napkins, telephone bills and ships manufactured in the country.
“The objective (of earlier rates) was to maintain equivalence to the existing taxes, and in some other cases the fitment had breached this equivalence principle. In others, the reduction is required because of the changing nature of the economy and changes that have occurred in consumer preference,” finance minister Arun Jaitley said.
Over the last three weeks, the council — comprising the Union and state FMs — had decided the rates for 1,211 goods and around 500 services and had been flooded with requests for revision. All goods and services have been put into four tax slabs of 5, 12, 18 and 28% in addition to several mass-consumption items that will attract zero tax.
Apart from the changes in rates, the GST Council also reworked the composition scheme for small businesses by allowing those with an annual turnover of Rs 75 lakh, instead of Rs 50 lakh earlier, to avoid any compliance burden and simply pay tax.
Small traders within the prescribed turnover will be able to opt for the scheme by paying 1% tax while manufacturers are allowed to pay 2% and restaurants 5%. Those opting for the composition scheme do not need to file invoices electronically or complete the three-stage filing process every month. They are, however, ineligible to claim input tax credit. While a lot of small businesses such as shopkeepers and small eateries are expected to opt for the scheme, manufacturers who supply to larger buyers may be forced to be part of the GST chain.
While some states were demanding that the window be made available to businesses with annual turnover of up to Rs 1 crore, the council opted for a lower ceiling to avoid significant revenue loss, sources told TOI. Depending on the experience with the scheme the ceiling may be enhanced over the next twothree years, they added. “Increasing the composition scheme limit to Rs 75 lakh from Rs 50 lakh will provide relief to many more small businesses, though service providers (except restaurants) continue to remain outside the ambit of composition levy,” said Pratik Jain, a partner at consulting firm PwC.
Some of the changes in the tax rates were also necessitated by demands from states and industry. For instance, states which offer entertainment tax exemption to regional films will have to refund GST once the new regime kicks in. As a result, they impressed upon the council to have a lower levy for tickets that cost up to Rs 100a move that will not impact those who watch movies in multiplexes in large cities. Similarly, based on industry demand, ministers decided to lower the levy on jobwork for textiles, gems and jewellery, printing and leather from 18% to 5%.
“The outcome of this meeting of the GST Council is likely to have a positive impact on various sectors like textiles, education, entertainment etc as their concerns on rates have been heard and addressed by the GST Council,” said Harpreet Singh, partner for indirect tax at KPMG.
Source: ET Realty
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