The Goods and Services Tax Council cut rates on 17 items and six types of services during its 31st meeting on Saturday, leaving only one common use item — cement — in the 28% bracket.
Cutting rates on cement would have a significant impact on revenues and so the Council decided to hold off on it, Finance Minister Arun Jaitley said.
Seven items that saw tax rates being slashed from the 28% bracket are certain vehicle parts used in agriculture, monitors and TVs up to 32 inches, retreaded tyres, power banks, digital cameras, videogame consoles (all from 28% to 18%), and parts and accessories for the carriages for disabled persons (from 28% to 5%).
The GST rate on cinema tickets above ₹100 was cut from 28% to 18% and on tickets up to ₹100 from 18% to 12%.
“There was an extensive discussion about revenues and whether the growth has been enough or not, and how to reconcile this with the need to cut some rates,” Mr. Jaitley said at a press conference, following the meeting.
Tough revenue target
“The revenue target is stiff because the 2014-15 base year, for many reasons, saw increased revenue. Add to this the 14% increase we have factored in since then every year, and that means that the revenue target is actually quite stiff,” he said.
Four items, mainly to do with cork, saw their tax rates cut from 18% to 12% and 5%. Another four items saw rates cut from from 12%, and two from 5%.
Mr Jaitley said a Group of Ministers, in consultation with the National Institute of Public Finance and Policy (NIPFP), will study the revenue data from the available portions of the first two years of GST and submit its analysis to the Council. The revenue impact of Saturday’s rate cuts over the full fiscal year would be ₹5,500 crore, he added.
He added that the items that remained in the 28% tax bracket were of three categories: luxury and sin goods, which, he said, the Council was unlikely to change; items used by the more affluent sections of society, which could wait, and only one item of common use, cement, which will be looked at again once there is greater confidence in the revenue position.
Services supplied by banks to Basic Savings Bank Deposit account holders under the Jan Dhan Yojana will not attract GST. Air travel of pilgrims by non-scheduled/charter operations being facilitated by the government under bilateral arrangements will attract a lower GST rate of 5 per cent.
The Council has decided that 5% would be levied on renewable energy devices and parts for their manufacture.
“The selection of items where rate reductions have been announced appear to be influenced by the desire to minimise revenue dips,” M.S. Mani, Partner at Deloitte India said. “It also indicates that the process of rate rationalisation would continue where necessary in the GST stabilisation phase. With this round of rate reductions, the GST rates on virtually every product is lower or equal to the indirect tax impact prior to GST.”
The Council also decided to refer several key items to the relevant committees so that their recommendations could be presented at the next meeting in January.
These issues included extending the Composition Scheme to small service providers, from its current applicability for only traders and manufacturers, looking into the tax rate on lotteries and on residential properties, and also reviewing the threshold limit of exemption from GST.
Single appellate panel
The GST Council took another decision aimed at putting to rest a large part of the confusion surrounding the applicability of the tax. At the moment, each State has an Advance Ruling Authority (ARAs) that can issue a ruling on any issue pertaining to GST rates and their applicability. Often, different ARAs deliver conflicting judgements.
The GST Council has decided to create a Centralised ARA that will provide a ruling in such cases.
“The in-principle approval of the GST Council on formation of a Centralized Appellate Authority for Advance Ruling in cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities is quite a welcome one for most industries,” Abhishek Jain, Tax Partner at EY India said.
“The Centralized Appellate Authority would aid in resolving the worries of taxpayers present pan-India in cases of varied rulings in different states,” he added.
The Council also decided to extend the due date for the filing of the GST annual returns to June 30, 2019.
