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GST Council reduces rates of 66 products, eases rules for small businesses

GST rate cut

GST rate cut

Given the demands from several industrial segments, small traders and producers and keeping the interests of relatively low-income consumers in mind, the Goods and Services Tax (GST) Council on Sunday decided to lower the tax burdens on several items in the upcoming GST regime.

 

The Goods and Services Tax (GST) Council on Sunday decided to reduce tax rates on 66 items (Download full list)  after receiving representation from various industry bodies. GST council considered reduction of rates for 133 items, but settled for reduction of rates for 66 items including  pickles and cheaper cinema tickets to insulin and instant food mixes.

“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

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.

Movie tickets costing Rs 100 and below will now attract 18%, against 28% proposed earlier, while those above Rs 100 will continue to attract 28% GST.

Packaged food like pickles, mustard sauce and morabba will attract 12% GST, against 18% proposed earlier. Also, tax rates on cashew nuts have been cut to 5% from 12%.

The council also reduced the GST (service tax) rate on job workers in labour-intensive industries namely clothing, leather, jewellery, diamond processing and printing from 18% proposed earlier to 5%, in a move that would give a big relief to lakhs of job workers and artisans.

On being asked about the tax rates on sanitary napkins, the finance minister said, “What has been decided earlier remains. No further rates for this category”. Sanitary napkins have been classified under the 12% bracket.

The Council also lowered GST rates on children’s drawing books to nil from 12%. Computer printers will attract 18% tax as against 28% earlier.

“We have tried to stick to revenue neutrality to the extent possible..but some (revenue) sacrifices have been made to reduce the burden on small traders, which are great job creators,” Finance Minister  – Arun Jaitley

Apart from the changes in rates, the GST Council also  revised the composition scheme for benefit of small businesses by increasing the threshold limit of  annual turnover to Rs 75 lakh, instead of Rs 50 lakh earlier, to avoid any compliance burden and simply pay tax. This should benefit a large number of businesses who had turnover between 50 and 75 lakhs as they can opt for composition scheme and greatly reduce their compliance burden.

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. Depending on the experience with the scheme the ceiling may be enhanced over the next two to three years, they added.

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.

Harishanker Subramaniam, national leader – indirect tax, EY India, said, “The Council has shown its continued willingness to reconsider which is heartening. E-way bill discussions are deferred to June 18 meeting, hope they defer this by six months and water down the provisions to avoid challenges. Anti-profiteering rules are now likely to be out post July 1 which could be a challenge from a clarity perspective. With potentially two more Council meetings we will be down to the wire for July 1 implementation”.

Sunday’s meeting also saw discussions on transitional rules and decided the next meeting will be on June 18.

Download full list of items for which rates have been amended

4 Comments

  1. Anonymous says:

    no body make it clear for small scale industries doing fabrication and cleaning GST RATES

    • gstsamadhaan says:

      Dear Sir,

      You can contact us for free consultation on your queries related to GST.

      Regards
      GST Samadhaan Team

  2. Anuj upadhayay says:

    What are the gst rates for bricks and how the bricks manufacturer gets gst number

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