GST rates revised: The impact on various sectors
- Indirect Taxes
- Jun 19, 2017 | CA Nayan Rijhwani
Over the past three weeks, the Goods and Services Tax (GST) Council — comprising union and state finance ministers — announced the rates for 1,211 goods and around 500 services, all falling into four tax slabs: 5, 12, 18, and 28 percent. In addition, several mass-consumption items will attract zero tax. They were met with a flood of requests for revisions.
On 11 June, the council met to review the rates on the basis of representation made by the industries and traders. Finance Minister Arun Jaitley addressed the outcome of the review, saying, “After considering the recommendations, the GST Council has reduced the tax level in 66 out of 133 items on which representations were made by the industries”.
The overall weighted average of all tax rates decided by the council is much lower than the rates people pay today, he said. “Therefore, there will be an adverse revenue impact if other things remain equal. But we are also hoping for revenue buoyancy and a check on inflation that GST will ensure so as to make up for that loss”.
The finance minister added that under GST, traders, manufacturers, and restaurants with turnover of up to Rs 75 lakh can use the composition scheme with lower rates of 5, 2, and 1 percent, respectively, with lower compliance against Rs 50 lakh earlier. Whether or not the same increased turnover limit for the composition levy will apply in the case of special category states will be decided in the next council meeting on 18 June.
Jaitley also said that "in certain cases the rate fitment committee went beyond the equalization principle of maintaining the current tax incidence".
The tax rate on job works was also lowered to facilitate the outsourcing of business activities.
Jaitley, however, hinted that the GST rate on hybrid cars will not be reviewed. The environmentally friendly hybrid cars will attract a 15 percent cess over and above the 28 percent GST rate, the same rate levied on large luxury cars and sport utility vehicles.
Rate increases and decreases following the 11 June review
|S.No.||Chapter /heading /sub-heading /tariff item||Description of goods||Earlier GST rate||Revised GST rate||Increase/decrease|
|1.||0506, 0507, 90||Bones and horn cores, bone grist, bone meal, etc. Hoof meal, horn meal, etc.||5%||0%||Decrease|
|3.||0801||Cashew nut in shell||12%||5% (under reverse charge)||Decrease|
|5.||1104||Cereal grains hulled||5%||0%||Decrease|
|7.||20 (All goods)||Preparations of vegetables, fruits, nuts, or other parts of plants, including pickle,murabba, chutney, jam, jelly||18%/12%||12%||Decrease|
|8.||2103, 2103, 00, 2103 90||Ketchup and sauces (other than curry paste, mayonnaise, and salad dressings; mixed condiments and mixed seasoning) Mustard, Sauces||18%||12%||Decrease|
|9.||2103 90 10,2103 90 30,2103 90 40||Curry paste, mayonnaise, and salad dressings, Mixed condiments and mixed seasonings||28%||18%||Decrease|
|10.||2106||Bari made of pulses including mungodi||18%||12%||Decrease|
|11.||2201 90 10||Ice and snow||12%||5%||Decrease|
|12.||2501||Salt, all types||5%||0%||Decrease|
|14.||28||Dicalcium phosphate (DCP) of animal feed, grade conforming to IS specification No. 5470/2002||12%||0%||Decrease|
|16.||29, 30, 3302||(i)Menthol and menthol crystals, (ii)Peppermint (mentha oil),(iii) Fractionated/de-terpenated mentha oil (DTMO), (iv) De-mentholised oil (DMO), (v) Spearmint oil, (vi) Mentha piperita oil||18%||12%||Decrease|
|17.||3304 20 00||Kajal (other than kajal pencil sticks)||28%||0%||Decrease|
|18.||3304 20 00||Kajal pencil sticks||28%||18%||Decrease|
|21.||3822||All diagnostic kits and reagents||18%||12%||Decrease|
|23.||3926 90 99||Plastic tarpaulin||28%||18%||Decrease|
|24.||4202||(i) School satchels and bags other than of leather or composition leather, (ii) Toilet cases (4202 12 10), (iii) Hand bags and shopping bags of artificial plastic material (4202 22 10),of cotton (4202 22 20), of jute (4202 22 30), , vanity bags, (iv) Handbags of other materials excluding (4202 22 40), wicker work or basket work (4202 29 10)||28%||18%||Decrease|
|25.||4820||Exercise books and notebooks||18%||12%||Decrease|
|27.||4903||Children’s picture, drawing, or coloring books||12%||0%||Decrease|
|28.||57||Coir mats, matting, and floor covering||12%||5%||Decrease|
|29.||65 [All goods]||Headgear and parts thereof||28%||18%||Decrease|
|30.||6703||Human hair, dressed, thinned, bleached, or otherwise worked||28%||0%||Decrease|
|31.||68||Fly ash blocks||28%||12%||Decrease|
|32.||6810 11 90||Pre-cast concrete pipes||28%||18%||Decrease|
|33.||6906||Salt-glazed stoneware pipes||28%||18%||Decrease|
|34.||7015 10||Glasses for corrective spectacles and flint buttons||18%||12%||Decrease|
|35.||71||Rough precious and semi-precious stones||3%||0.25%||Decrease|
|37.||8215||Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs||18%||12%||Decrease|
|38.||8308||All goods, including hooks and eyes||28%||18%||Decrease|
|39.||84||Pawan chakki that is air-based atta chakki||28%||5%||Decrease|
|40.||84||Fixed speed diesel engines||28%||12%||Decrease|
|41.||4011||Rear tractor tyres and rear tractor tyre tubes||28%||18%||Decrease|
|42.||8708||Rear tractor wheel rim, tractor centre housing, tractor housing transmission, tractor support front axle||28%||18%||Decrease|
|43.||8423||Weighing machinery (other than electric or electronic weighing machinery)||28%||18%||Decrease|
|44.||8443||Printers (other than multifunction printers)||28%||18%||Decrease|
|45.||8482||Ball bearings, roller bearings, parts, and related accessories||28%||18%||Decrease|
|46.||8504||Transformers industrial electronics||28%||18%||Decrease|
|48.||8504||Static convertors (UPS)||28%||18%||Decrease|
|51.||8525 60||Two-way radio (walkie talkie) used by defense, police, and paramilitary forces, etc.||28%||12%||Decrease|
|52.||8528||Set top box for TV||28%||18%||Decrease|
|53.||8528||Computer monitors not exceeding 17 inches||28%||18%||Decrease|
|54.||8539||Electrical filaments or discharge lamps||28%||18%||Decrease|
|57.||8544 70||Optical fiber||28%||18%||Decrease|
|58.||8472||Perforating or stapling machines (staplers), pencil sharpening machines||28%||18%||Decrease|
|62.||9017||Instruments for measuring length, for use in the hand (for example, measuring rods and tapes, micrometers, calipers)||28%||18%||Decrease|
|64.||9504||Playing cards, chess board, carom board, and other board games, like Ludo, etc. (other than video game consoles and machines)||28%||12%||Decrease|
|65.||9506||Swimming pools and padding pools||28%||18%||Decrease|
|66.||9603 10 00||Muddhas made of sarkanda and phool bahari jhadoo||5%||0%||Decrease|
|67.||9704||Postage or revenue stamps, stamp-post marks, first-day covers, etc.||12%||5%||Decrease|
|69.||4823, 8472, 90 11,9101, 9102, 9021||Braille paper, braille typewriters, braille watches, hearing aids, and other appliances to compensate for a disability (These goods are covered in List 32 appended to notification No. 12/2012-Customs, dated 17.03.2012 and are already at 5% GST [Chapter 90])||-||5%||Increase|
Source: GST India website
Overall, the government has taken a commendable step in responding to industry recommendations within such a short time span and reducing/modifying the rates of almost 50 percent of the items in question.
In the council’s next meeting on 18 June, they will take up residual issues related to the pending draft rules like the E-way Bill, rate for lottery, etc.
Jaitley said that, “Irrespective of the date on which it starts, some people will say they are not ready, so they have no option but to get ready".
"With potentially two more council meetings, we will be down to the wire for July 1 implementation," said Harishanker Subramaniam, national leader, indirect tax, EY India.
The government has been making sincere efforts to ensure hassle-free implementation of GST. Some of the steps taken in this regard are:
- Reduction in GST rates
- Launching of Twitter handle to answer queries
So now it’s time for us to gear up for the upcoming reforms under GST to ensure a smooth transition
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