After its 47th meeting, the GST Council on Wednesday, 29 June, decided to increase the tax rates on certain goods and services while withdrawing tax exemptions on certain items like pre-packaged foods, which are consumed on a large scale.
As the Goods & Services Tax legislation completes 5 years and has evolved from its “infant” stage into a stable state legislation today, the industry is again abuzz analysing the hits, misses, expectations, and future outlook of the ‘most ambitious tax reform of the country in its half-decade stint. With revenues getting buoyant in the recent months and compliance issues settling down, a section of stakeholders strongly feel that the law has started to stabilise now, and GST 2.0 is already underway.
On the other hand, another section still feels that the legislation is a work-in-progress and has lots of roads to cover before it can be said to have achieved the desired objectives and done justice to the term ‘Good and Simple Tax’. As a child out of the cradle learns to stand, walk and then run, GST now seems to be out of the cradle and is ready to run its course to become a matured and sophisticated legislation needed to deal with the modern-day growth economy such as India.
Recommendations for the said changes were made by the Group of Ministers (GoM) headed by Karnataka CM Basavaraj Bommai, who submitted a report on tax exemptions and corrections of the inverted duty structure. Tarun Bajaj, the revenue secretary, said that these changes will come into effect from 18 July.
It is needless to say that whenever the history of Indian GST is written, the impact of technology in its implementation and execution would invariably be a major highlight. The report card of the GST law can under no circumstance be prepared without grading the pillar on which the entire framework rests – technology. The importance of technology can be highlighted not only by the fact that all compliances and invoicing are done online but also that innumerable provisions under the law have been framed and undergone changes due to the technology that goes behind the common portal.
While it can be comfortably said that tax automation ushered by the Indian GST law has been inspirational for the world at large, the scope for improvement cannot be undermined. For instance, although the implementation of the e-invoicing system has significantly contributed to broadening the tax base and reducing the fake invoice menace, many of its benefits are yet to be fully unlocked due to impending technical bottlenecks. Issues on the online portal with respect to the generation of e-invoices and flow into the GST common portal require manual intervention in the compliance process.
To unlock its full potential, the e-invoice, e-waybill, and GST portal must be seamlessly integrated which shall result in the reduction of the compliance burden and efficiency in tax management, which we believe is a work in progress.
Know what is GST:
The Goods and Services Tax(GST) is actually an indirect tax. Because of this today Indian markets have been integrated and the Indian economy has been converted into one market on the basis of one form. It applies to both goods and services. Let us tell you that on August 3, 2016, the Rajya Sabha passed the GST Bill. This tax has replaced all existing indirect taxes. The government implemented GST on 1st April 2017 across the country. GST is divided into three parts.
CGST – It is called Central Goods and Service Tax. When any goods or services are supplied within the state, then its tax is paid to the central government. This is called CGST. For example, when a trader takes goods or services from another trader in his own state, then the Central Government has to pay CGST for this deal.
SGST – It is called State Goods and Service Tax. When any goods or goods are supplied within the state, then the tax going to the share of the state government comes under the definition of state tax. For example, when a trader buys and sells any goods from a trader of his own state, then SGST is given to the state government on it.
IGST – It is called Integrated Goods and Service Tax. When there is trade between traders of two different states for goods or services, then Integrated GST is levied on it. It is the sum of both CGST and SGST. The trader pays this tax only to the central government.
Items costlier on pockets:
– Packaged food like pre-packed curd, lassi, and buttermilk will now attract GST. “Hitherto, GST was exempted on specified food items, grains etc when not branded, or right on the brand has been foregone. It has been recommended to revise the scope of the exemption to exclude from it prepackaged and pre-labelled retail pack in terms of Legal Metrology Act, including pre-packed, pre-labelled curd, lassi and buttermilk,” said the council in a press release.
– Hotel Rooms, under Rs 1,000 per day, which are not taxed at present, will attract 12 percent GST.
– An 18 per cent GST will be levied on items like bank chequebooks and printed maps (hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes). Currently, these items are not under the ambit of GST.
– Post office services will now be taxed. An exception, however, has been provided for postcards and inland letters, book posts, and envelopes weighing less than 10 gm.
– Room rent (excluding ICU) exceeding Rs 5,000 per day per patient charged by a hospital, shall be taxed to the extent of the amount charged for the room at 5 per cent without ITC (Input Tax Credit).
– Prices of LED lights and lamps, fixtures, and their metal printed circuit boards will surge as the council has approved the recommendation to increase their GST from 12 per cent to 18 per cent.
– Rates of printing, writing and drawing ink are also set to increase as 18 per cent GST will be levied on them, as against the current rate of 12 per cent.
– GST of knives along with cutting blades, paper knives, pencil sharpeners and blades, spoons, forks, ladles, skimmers, cake servers, etc, is also going to go up from 12 per cent to 18 per cent.
– Power-driven pumps primarily designed for handling water such as centrifugal pumps, deep tube-well turbine pumps, submersible pumps, and bicycle pumps, will also see a GST surge from 12 to 18 per cent.
– Machines for cleaning, sorting, or grading seeds and grain pulses, machinery used in the milling industry or for the processing of cereals, etc, Pawan chakki or air-based atta chakki, and wet grinders will now attract 18 per cent GST as opposed to the current 5 per cent GST.
– Besides machines used for cleaning, sorting and grading eggs, fruit, or other agricultural produce, milking machines and dairy machinery will also cost more as their GST is being spiked from 12 per cent to 18 per cent.
Items lighter on pocket:
– Ropeway Rides: The GST Council has brought down the tax on ropeway rides from 18 per cent to 5 per cent.
– Rent of goods carriage: The renting of trucks or goods carriages when the cost of fuel is included, is set to become cheaper as its GST is set to go down from 18 per cent to 12 per cent.
– Ostomy Appliances: GST for these appliances are set to reduce from 12 per cent to 5 per cent.
– Orthopaedic Appliances: Items like splints and other fracture appliances; artificial parts of the body; other appliances which are worn or carried or implanted in the body to compensate for a defect or disability; and intraocular lenses will become cheaper as their GST is set to drop from 12 per cent to 5 per cent.
– Defence Items: IGST on specified defence items imported by private entities/vendors, when the end-user is the defence forces, has been exempted.
The GST Council is the highest decision-making body of the indirect tax regime. It is headed by the Union finance minister and comprises representatives of all states and UTs. The GST Council on Wednesday also deferred its decision on levying a 28 per cent tax on casinos, online gaming, horse racing, and lottery, pending more consultations with stakeholders, Sitharaman said, adding that Goa and some other states wanted to make more submissions.
The GoM (Group of Ministers) had recommended that online gaming should be taxed at the full value of the consideration, including the contest entry fee paid by the player on participating in the game.
The council will meet again in the first week of August to decide on the issue, she said. After an invite from Tamil Nadu Finance Minister P Thiaga Rajan (PTR), the meet is set to be held in Madurai.
