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GST Council: Key Reliefs for Common man

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The GST Council, headed by Finance Minister Arun Jaitley, today slashed rates on 17 goods and six services, such as televisions, movie tickets, video games, among others, restricting only 27 items in the highest tax slab of 28 percent. New rates will be applicable from January 1, 2019.

Apart from reducing rates, the Council also rationalized and made clarifications related to certain goods, a move that is expected to boost consumption. Essentially, the 28 percent slab will mainly consist of demerit goods such as aerated drinks, tobacco products and automobile and auto parts, generally considered as luxury goods. “The 28 percent (tax) bracket is moving towards a sunset,” Jaitley said.

Apart from demerit and luxury goods, the Council, the highest decision-making body under the new indirect tax regime, kept rates on cement, dishwashers and air conditioners unchanged.

Cement continued to remain in the highest tax slab despite being an item of common use as the government garners as much as Rs 13,000 crore from that commodity. Similarly, cutting rates on auto parts would cost the exchequer Rs 20,000 crore loss, Jaitley explained.

This was the fifth round of rate cut and rationalisation exercise since the implementation of GST from July 1, 2017. In the last one and half years, the council has significantly pruned the list of 226 items placed in the highest tax slab of 28 percent, demonstrating the Centre and states’ growing confidence in the new system that seeks to unify India into one common national market.

The revenue impact of the rate rationalisation exercise will be Rs 5,500 crore annually and Rs 1,375 crore for the remaining three months of the financial year 2018-19.

The move comes after Prime Minister Narendra Modi promised bringing most goods under the 18 percent or lower GST slab. "Today, the GST system has been established to a large extent and we are working towards a position where 99 percent things will attract the sub-18 percent GST slab," Modi had said earlier during the week, while hinting that the highest tax slab (28 percent) will be restricted to luxury and sin goods.

The council will now meet in January next year.

The rate cut assumes significance as it is one of the biggest changes in the GST slabs ahead of the 2019 general elections. The government effectively wants to set 18 percent as the highest GST tax slab, except only two broad categories of goods and services.

Among other items in the 28 percent, retreaded tyres, sporting equipment, movie tickets, billiards and snookers and lithium battery power banks will attract 18 percent GST. Wheelchair accessories too have been proposed to be brought under the 5 percent bracket from 28 percent.

The GST rate on third-party insurance premium of goods carrying vehicles will be 12 percent now, while services supplied by banks to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) will now be exempted.

Air travel of pilgrims by charter operations facilitated by the government under bilateral arrangements will now attract the same rate of GST as applicable to similar flights in economy class — 5 percent tax with availability of input tax credit.

Besides, the council also recommended reducing GST on solar power generating plants and renewable energy items. GST rate on movie tickets above Rs 100 was reduced to 18 percent from 28 percent and on tickets upto Rs 100 from to 12 percent from 18 percent.

The recommendations of the GST Council’s fitment committee on rate rationalisation and balancing revenue flows were considered during the meeting, Jaitley said.

GST RATES REDUCED

In Nutshell, the GST Rates are reduced for following Goods and Services:

A. 28% to 18%:  Pulleys, transmission shafts and cranks, gear boxes etc., falling under HS Codel 8483  Monitors and TVs of upto screen size of 32 inches,  Re-treaded or used pneumatic tyres of rubber; Power banks of lithium ion batteries. Lithium ion batteries are already at 18%. This will bring parity in GST rate of power bank and lithium ion battery.  Digital cameras and video camera recordersl  Video game consoles and other games and sports requisites falling under HS codel 9504.

B. 28% to 5%: Parts and accessories for the carriages for disabled persons

C. 18% to 12%: Cork roughly squared or debagged,  Articles of natural cork,  Agglomerated cork

D. 18% to 5%: Marble rubble

E. 12% to 5%:  Natural cork,  Walking Stick,  Fly ash Blocks

F. 12% to Nil:  Music Books

G. 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.

GST on solar power generating plant and other renewable energy plant

GST rate of 5% rate has been prescribed on renewable energy devicesl & 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]. Other goods or services used in these plants attract applicable GST.  Certain disputes have arisen regarding GST rates where specified goodsl attracting 5% 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, thel 70% of the gross value shall be deemed as the value of supply of said goods attracting 5% rate and the remaining portion (30%) 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 Rs. 100 shall be reduced from 28% to 18%l and on cinema tickets upto Rs. 100 from 18% to 12%. 

GST rate on third party insurance premium of goods carrying vehicles shall bel reduced from 18% to 12% 

Services supplied by banks to Basic Saving Bank Deposit (BSBD) accountl holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) shall be exempted. 

Air travel of pilgrims by non-scheduled/charter operations, for religiousl 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 (i.e. 5% with ITC of input services).

OTHER PROSPECTIVE DECISIONS

At the next meeting in January, the Council will also look at the report submitted by respective GoMs on the nature and shape of calamity tax proposed and threshold limit of exemption under GST for the MSME sector.

It will also look at the issue of extending composition scheme — a scheme to benefit small taxpayers by providing concessional GST without ITC benefits — to small service providers.

The rate of tax and threshold limit will be proposed by the law and fitment committee and will be taken up for discussion in the next meeting. In addition, tax rate on lotteries, and taxation of residential properties in the real estate sector will also be looked at by the law and fitment committee.

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 has been approved.

The Council approved amendment in section 50 of Central GST (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, i.e. interest would be leviable only on the amount payable through the electronic cash ledger.

Revenue secretary Ajay Bhushan Pandey said the new return filing system will be introduced on a trial basis from April 1,2019 and made mandatory from July 1 next year.

“There would be a single cash ledger for each tax head. The modalities for implementation would be finalised in consultation with IT backbone GST Network and the accounting authorities,” a finance ministry statement said.

“A scheme of single authority for disbursement of the refund amount sanctioned by either the Centre or the state tax authorities would be implemented on pilot basis. The modalities for the same shall be finalized shortly,” it said.

In addition, taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills.

MAJOR RELIEF IN GST RETURN FILING PROCESS

The Council also extended the last date for filing annual return forms for 2017-18 by another three months to June 30.

Filing returns via summary form GSTR-3B and outward supplies for GSTR-1 during July, 2017 to February, 2019 have been extended till March 31, 2019

Late fees have also been waived for all taxpayers filing return through GSTR-1, GSTR-3B  and GSTR-4 from July, 2017 to September, 2018, filed after December 22 but on or before March, next year.