The Goods and Services Tax (GST) Board, chaired by Union Finance Minister Nirmala Sitharaman, on Tuesday approved in principle higher rates for certain goods and services and the removal of exemptions for several items of mass consumption in order to simplify the rate structure, in accordance with an interim agreement. report issued by a ministerial college.
The move is important because it would help states, which have been pushing to either extend the compensation scheme beyond June 30 or increase their revenue share from the current 50%.
The ruling, however, would make the items more expensive for consumers.
The council, made up of the Union, states and union territories, will on Wednesday take the extension of compensation to the states and the 28% imposition on casinos, online gambling and shopping, bringing it to the same level as gambling, its two members said. .
During the meeting, the council endorsed the interim report of the Group of Empowered Ministers (GoM), led by the Chief Minister of Karnataka, Basavaraj S Bommai, on rate rationalization and proposed to scrap the exemption for 15 items such as lassi, buttermilk, pappad, some food grains (oats, millet, bajra), jaggery and some vegetables.
Those “unpackaged and unlabelled” will remain exempt.
The board is said to have favored the panel’s argument that the exemptions, due to the subjective nature of the term “branded”, were causing disputes and lost revenue.
The board approved changing the term ‘branded’ to ‘pre-packaged and labelled’ for retail sale to avoid litigation. Currently, branded cereals are subject to a 5% GST.
The panel stated that the exemption/concession rates for manufactured items should be reduced because these not only inverted GST rates and negatively affected domestic capacity building, but did not bring either more significant gains to beneficiaries due to accumulated costs, given the accumulation of input tax credit (ITC).
Items cost more
The board reportedly approved increasing the rate of LED lights, ink, knives, blades, electric pumps and dairy machines from 12% to 18%; that for cereal milling machines from 5 to 18%; and that for solar water heaters and finished leather from 5 to 12 percent. It is proposed to increase to 18 per cent the rate of services under contract of employment provided to governments and local authorities. The council also gave the go-ahead to raise the rate on specified petroleum products from 5% to 12%.
Withdrawal of exemptions
The Board favored GoM recommendations on removing exemptions for services such as carrying business class passengers from airports in the North East.
Hotel accommodation costing less than Rs 1,000 per day will be taxed at the same level as the industry (12%). Hospital rooms, except intensive care, with a daily rent of Rs 5,000, could be taxed at 5% without ITC.
He also endorsed suggestions on removal of exemption from services provided by the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Food Safety and Standards Authority of India, as well as on the storage and warehousing of taxable goods such as sugar and natural fibres.
In addition, he refused reimbursement from the ITC due to an inverted duty structure on edible oils and coal.
She wanted postal services other than postcards, inland letters, book mailings and envelopes weighing less than 10 grams to be taxed.
In addition, checks, in bulk or in book form, should be taxed at 18%, the Mauritanian government has recommended.
The GoM has come out in favor of removing the exemptions granted to the rental of residential accommodation by companies for residential purposes.
Regarding electronic invoices on intrastate movements of gold, jewelry and precious stones, the council empowered states to decide the threshold above which they should be mandatory. A panel of state ministers had recommended that the threshold be Rs 2 lakh. Some states wanted a higher one.
For high-risk taxpayers, the council approved enforcement-focused systems reforms suggested by a separate ministerial panel, allowing for post-registration verification, in addition to using their electricity bills and bank accounts to identify them.
The board also approved industry’s request to make compliance easier and provided flexibilities by removing the requirement to file refunds and extending the deadline for filing certain returns.
The proposed new margin schemes for tour operators, taxation of virtual digital assets, creation of a GST tribunal, compliance facility for small e-commerce retailers and tax exemptions on services to panchayats and municipalities have been postponed.