Economy

Decision on GST hike taken after all States’ consent: Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman. File

Union Finance Minister Nirmala Sitharaman. File | Photo Credit: Kamal Narang

Finance Minister Nirmala Sitharaman on July 19 clarified the GST Council has exempted from Goods and Service Tax (GST), all food items including wheat, pulses, rice, maize, when sold loose, and not pre-packed or pre-labelled.

“They will not attract any GST. The decision is of the @GST_Council and no one member,” she pointed out.

The Finance Minister explained the process of decision making on the GST rate changes for pre-packed and pre-labelled, unbranded food items in 14 tweets.

“Recently, the GST Council in its 47th meeting recommended to reconsider the approach for imposition of GST on specified food items like pulses, cereals, flour, etc. There have been a lot of misconceptions about this that have been spread,” she noted.

Also read: Pay 5% GST on pre-packed, labelled food items, hospital rooms above ₹5,000 from Monday

She explained that this is not the first time such food articles are being taxed. States were collecting significant revenue from foodgrain in the pre-GST regime. Punjab alone collected more than ₹2,000 crore on food grain by way of purchase tax. Uttar Pradesh collected ₹700 crore, Ms. Sitharaman wrote.

“Taking this into account, when GST was rolled out, a GST rate of 5% was made applicable on branded cereals, pulses, flour. Later this was amended to tax only such items which were sold under registered brand or brand on which enforceable right was not foregone by supplier.

“However, soon rampant misuse of this provision was observed by reputed manufacturers & brand owners and gradually GST revenue from these items fell significantly.

Also read: June’s GST revenues second highest at over ₹1.44 lakh crore

Disgruntled over the issue, suppliers and industry associations who were paying taxes on branded goods wrote to the government to impose GST uniformly on all packaged commodities to stop such misuse. The Finance Minister said this rampant evasion in tax was also observed by States.

The Fitment Committee — consisting of officers from Rajasthan, West Bengal, Tamil Nadu, Bihar, Uttar Pradesh, Karnataka, Maharashtra, Haryana and Gujarat — had also examined the issue over several meetings and made its recommendations for changing the modalities to curb misuse. Ms. Sitharaman said, “It is in this context that the GST Council in its 47th meeting took the decision.”

With effect from July 18, 2022, only the modalities of imposition of GST on these goods were changed with no change in coverage of GST except two to three items.

It has been prescribed that GST on these goods shall apply when supplied in "pre-packaged and labelled" commodities attracting the provisions of Legal Metrology Act.

For example, items like pulses, cereals like rice, wheat, and flour, etc, earlier attracted a GST of 5% when branded and packed in unit container. From July 18, these items would attract GST when “pre-packaged and labelled”.

The Finance Minister further said that it was a unanimous decision by the GST Council. All states were present in GST Council when this issue was presented by the Group of Ministers on Rate Rationalisation in the 47th meeting held in Chandigarh on Jun 28, 2022.

“All States, including non-BJP States (Punjab, Chhattisgarh, Rajasthan, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana, Kerala) agreed with the decision. This decision of the GST Council is yet again by consensus,” she tweeted.

“Further, the GoM that recommended these changes was composed of members from West Bengal, Rajasthan, Kerala, Uttar Pradesh, Goa and Bihar and was headed by the Chief Minister of Karnataka. It carefully considered this proposal, taking into account the tax leakage.

“To conclude: this decision was a much-needed one to curb tax leakage. It was considered at various levels including by officers, the Group of Ministers, and was finally recommended by the GST Council with the complete consensus of all members,” Ms. Sitharaman wrote.


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Printable version | Jul 19, 2022 5:20:28 pm | https://www.thehindu.com/business/Economy/decision-on-gst-hike-taken-after-all-states-consent-nirmala-sitharaman/article65657721.ece