Motor vehicles and biscuits may have hogged the headlines when the Goods and Services Tax (GST) Council decided not to lower the rates last week, but beneath the news radar, 165 other categories, including ghee, butter, cheese, and dry fruits, met with the same fate.
The Fitment Committee (FC), the sub-committee of the GST Council comprising tax officials of the Centre and the States, had reviewed rates, including compensation cess, and procedural issues in respect of over 200 categories of goods. Finally, it recommended changes or clarification for 32 categories of goods, and deferred a decision in respect of 10, but left the rates on 167 categories of goods untouched.
Based on representations, the FC analyses and decides on the merits of a change in tax rates. Its recommendations are placed before the GST Council, which accepts or rejects them.
Ghee, cheese and butter attract GST at 12 per cent. There had been representations seeking that it be lowered to 5 per cent. However, the FC noted that in the pre-GST period, the tax had been nearly 12 per cent. As of now, these products are sold largely by the organised sector, by companies such as Amul and Mother Dairy. Small manufacturers can avail themselves of threshold exemption, the FC reasoned, and recommended no change.
On instant food mixes
Another proposal was for lowering GST on all convenience instant food mixes – idli mix, vada mix, dosa mix, gulab jamoon mix, thandai mix, payasam mix and upma mix – from 18 per cent to 5 per cent. The FC noted that processed food items attract 12 per cent tax, but a few items, including instant food mixes, attract 18 per cent. “These are consumed by better-off sections of society, who can afford the rate,” the FC said.
It also noted that GST on idli dosa batter had been reduced to 12 per cent. Instant food mix products are manufactured by large corporations and a rate reduction may not be passed on to consumers, but may lead to profiteering; hence no change was recommended.
The proposal for lowering GST rate on helmets, after the Motor Vehicles Act was amended, did not find favour with the FC. Inputs for helmets attract 18 per cent GST, and lowering the rate on helmets to 12 per cent may result in manufacturers seeking refund of unutilised input tax credit, with associated financial and administrative costs.