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GST Rate Cuts: Impact On Businesses And Government

GST Rate Cuts: Impact On Businesses And Government

Despite murmurs of opposition by a few states, the 31st GST council meeting was remarkably successful in fulfilling the central government’s objective of cutting GST rates. Rates of more than 20 goods and several services have been reduced.

The decision was in line with the long-term objective of the government to slowly reduce the scope of the 28 percent category and merge the 18 percent and 12 percent categories into a single rate of 15 percent. Besides a reduction in rates, the government also provided several important clarifications to remove ambiguities in rates and set right the uncertainty caused by a few decisions of the state level Authority for Advance Rulings.

Impact On Business

The top sectors benefitting from the rate cuts are consumer electronics (monitors and TVs, digital cameras, power banks, video games), food (frozen and branded vegetables, restaurants), renewable energy (solar power projects) and education. With seven goods removed from the 28 percent category, the only remaining items are luxury goods apart from automobile parts and cement which also may be dealt with once GST throws up the adequate revenue buoyancy.Reducing GST on vegetables (frozen, branded, cooked, uncooked or in preserved form) from 5 percent to nil Is a welcome move for consumers and the restaurant industry which is ineligible for input tax credit (ITC) on inputs. This rationalization in GST rates will positively impact the bottom line of restaurants and induce them to rationalize menu prices which will ultimately benefit consumers.

In the educational sector too, useful clarifications were issued to clarify the rates applicable on supply of food and drinks to students and faculty as below:

In a huge relief to the entertainment sector, and in response to their long-standing demand, the GST rate on cinema tickets has been rationalised as follows:

On the restaurant front, in a recent advance ruling, it was held that food items sold by a shopkeeper would be taxable at the rate of 5 percent if there is also a restaurant running in the same premises, as against the rate of 12 percent applicable on branded snacks and 18 percent on cakes and pastries. It has been clarified that the nature of business establishment making the supply of food, etc will not determine whether the supply is a supply of goods or services. It will rather depend on the constituents of each individual supply and whether the same satisfies the conditions/ingredients of a ‘composite supply’ or ‘mixed supply’. This clarification could heighten complexity as the GST rate would have to be determined on a case to case basis rather than a flat rate of 5 percent.

On the renewable energy front, decisions by various AARs had resulted in a situation wherein the entire EPC contract for setup of a solar power plant was taxable as a works contract service, at the rate of 18 percent. That led to the denial of the 5 percent concessional rate on solar power equipment. To provide relief to this sector and correct the anomaly, the GST council has provided for an artificial split between the goods and service portion of the contract as given below…

Thus, it can be seen that the government has targeted its actions towards providing relief in important sectors of mass consumption where the impact could be felt by the maximum number of people.

Impact On Central And State Governments

The government had targeted a minimum GST collection of Rs 1 lakh crore per month at the beginning of the financial year (Budget 2018-19). While a substantial part of the year has already gone by, only in April and October did the government manage to meet that target. Finance Minister Arun Jaitley said, after the GST Council meeting, that the reduced rates will have further hit tax revenue by Rs 5,500 crore (to be proportionately reduced for the 3 remaining months).
This being an election year, the government expenditure is already expected to be higher than normal and indisputably this move of the government to cut GST rates will result in further slippage of fiscal deficit targets for FY 2018-19.

As far as the states are concerned, it was reported for the very first time (contrary to populist logic) that certain states were in opposition to the reduction in rates, citing impact on revenue collections. This was also the first time where the convention of arriving at all decisions in the GST Council unanimously could have been shattered. However, the impact on the state governments is likely to be muted as the Centre is bound to provide full compensation to the states for five years considering annual revenue growth of 14 percent on the base year of FY 2015-16.

With the implementation of anti-evasion measures such as e-way bills, GST audits, the new compliance mechanism providing for system-determined input tax credits, it is expected that GST revenue collections would receive a boost in the year to come. The more buoyant the revenue collections, the more leeway available with the government to rationalize GST rates and reward honest taxpayers.

Overall, the decision of the GST Council can be seen as a win-win for the government, taxpayers and consumers.


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Source: Bloomberg Quint
More rate cuts likely at GST Council meet on September 28

More rate cuts likely at GST Council meet on September 28

A dip in revenues notwithstanding, the GST Council may decide to cut rates on more items this week to keep the consumption story going which typically slows in an election year despite a rise in government spending.

The 30th meeting of the GST Council will be held on Friday, September 28.Finance Minister Arun Jaitley, who will chair the meeting through video-conferencing, is expected to announce a further pruning of the peak 28% rate structure. Jaitley has prom…

Goods expected to see their way out of the 28% tax bracket include cement, certain automobile parts, digital cameras and certain categories of television sets, sources close to the development told DH. These may be placed under 18% or 12% slabs.

Cement is the only item of construction which remains under the 28% slab. Its removal from the highest bracket makes sense as construction activity, which slows during monsoon, is expected to pick up from next month.

After all, Jaitley believes GST has given a lot of purchasing power to consumers.

“There is no better opportunity for consumers to make purchases than in the environment which the GST has created. It is an opportunity to celebrate the biggest tax reform since Independence,” the minister said recently.

In the last last 14 months since GST was implemented, the council has slashed rates on 191 items from the 28% category. Originally, it consisted of 226 goods.

Apart from cement and automobile parts, tyres, automobile equipment, motor vehicles, yachts, aircraft, aerated drinks, betting and demerit items like tobacco, cigarette and pan masala remain in the 28% slab.

Even though the Centre has suffered a loss of about Rs 70,000 crore on account of reduction in tax on goods and services, the move has reduced the cost to consumers, increased purchasing capacity and added to the economy, Jaitley said.

The budgetary estimates of GST collections were more than Rs 1 lakh crore per month but the revenues have not met the target barring in April when collections topped Rs 1 lakh crore. However, the finance minister expects that the forthcoming festive season will give a boost to GST revenues.

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Source :  Deccan Herald
GST Council may replace 12% and 18% slabs with 14-15% one: Sushil Modi

GST Council may replace 12% and 18% slabs with 14-15% one: Sushil Modi

GST Council might replace the 12 per cent and 18 per cent slabs with a 14-15 per cent one, Sushil Modi: GST Councilsaid Bihar Deputy Chief Minister Sushil Modi on Thursday.

While addressing a seminar on the GST, organized by the Institute of Chartered Accountants of India, Modi said this slab rationalisation was likely to be taken up only after the GST collections have reached Rs 1 trillion. Experts claim this might take nine months to a year to reach this target.

This would reduce the number of GST rates to four. Also, the GST rates of items such as refrigerators, washing machines, small television sets, and paint and varnish could go down further after they were cut from 28 per cent to 18 per cent recently.

Except for April, the GST has never yielded revenue of Rs 1 trillion.

This was also an aberration since arrears of the previous months were paid. In July, Rs 964.83 billion was collected, against Rs 956.1 billion in June and Rs 940 billion in May.

“Pruning the number of GST rate slabs is definitely a good idea. But I don’t foresee that happening in the next nine to 12 months till the tax collections consistently reach the desired Rs 1-trillion-per-month target,” said Harpreet Singh, partner at KPMG.

At present, around 49 countries use a single GST rate, 28 use two rates and four countries including India have more rates.

Source :  Business Standard
GST rate cut: Companies need to show new rates on old stock also

GST rate cut: Companies need to show new rates on old stock also

Consumer durables companies and sanitary napkin makers will have to clearly GST Rate Cutshow new prices even on old stocks lying with their distribution channels after new goods and services tax (GST) rates came into effect from Thursday midnight.

The government will soon issue a directive to this effect.

“A directive will be issued by consumer affairs ministry shortly,” a senior government official said.

Consumer Affairs ministry will issue a directive under the Legal Metrology Act permitting companies to affix pasting or stamping of new prices on old stocks. This order will also apply to importers.

The Goods and Services Tax Council had cut tax rates on a host of white goods to 18% from 28% and exempted sanitary napkins from any tax. Both, the center and states notified the new rates late evening Thursday.

Companies can change prices on stocks in their possession, but handling prices changes on stocks in transit and that at dealers and retailers is an issue.

As per the directive revised MRP declaration can be by way of stamping or putting a sticker or online printing provided original MRP continues to be displayed. Companies will also have to advertise prices changes as also circulate notices to their dealers.

Also Read: 28th Council Meeting – Key Highlights & Rate Changes

“For stock in hand with companies, it’s easier to do a re-stickering but very difficult for the stock lying across the distribution chain. So long as the manufacturing companies publish a revised price list and communicate to the distributors and retailers, it should be ideally considered as sufficient compliance,” said Pratik Jain, indirect tax leader, PwC.

Experts also said that companies need to communicate to their distributors about change in tax rate asking them to pass it on to consumers.

“As Companies may not have control over the stock held with their distributors and dealers, changing MRP of such goods to pass on the benefit of reduced GST rate, is not possible. In such cases, it is advisable, that the Companies issue the proper communication to their dealers apprising them about rate change on their products and requesting them to pass on such benefit to the end consumer,” said Harpreet Singh, partner, KPMG India.

The move is similar to when the GST Council slashed rates for close to 200 products last year in November.

At that time too, it had directed companies to clearly indicate new price tags on existing stocks in the trade pipeline, so that consumers could make out the difference between prices pre and post-GST rate change.

The metrology division enforced that the new MRP be printed on stickers following the cut in GST, relaxing the rule that the new prices needed to be printed directly on the packaging.

Source: The Economic Times

28th GST Council Meeting- Key Highlights & Rate Changes

28th GST Council Meeting- Key Highlights & Rate Changes

GST council came up with new changes in GST tax 28th GST Council Meetingrules after 28th GST council meeting held on Saturday 21st on July 2018. The best and most accepted change is an exemption of GST on sanitary napkins.

It brings a lot of happiness & joy for women as now they won’t have to pay more for napkins. Before it was the biggest discussion that why Govt is imposing GST on napkins, whereas they promote women empowerment.

So, here are some changes announced in 28th GST council meeting:-


In recent 28th GST council meeting slashed rates on few items and totally in this one-year Govt reduced tax rates on total 191 items. Govt is making these changes to lessen the tax burden on frequently purchase goods and it planned to keep on luxury items on 28 percent slab.

GST council exempt some goods for GST Tax and here are those:

  • Sanitary napkins
  • Fortified Milk
  • Raw materials used in making brooms
  • Stone, marble or wood god statues
  • Leaves of Saal tree
  • Memorial coins disseminate by RBI or Govt of India

These got exempted from GST tax structure.

Also Read: GST rate cut impact: Synthetic textiles to be 5-7% cheaper from August

GST council also trim rates on some items and here are the details:

Here are all the changes in GST rates on goods and what will get cheaper after the new rates come into effect:

On Products

  • GST council cut rates on cosmetics from 28% to 18%
  • On phosphoric acid fertilizer from 12% to 5%
  • Cut rates on handloom blanket 12% to 5%
  • Cut rates on vacuum cleaners from 28% to 18%
  • GST council trim rates on storage water heaters from 28% to 18%
  • Trim rates on ice cream freezer from 28% to 18%
  • Cut rates on perfumes from28% to 18%
  • On refrigerators & irons from 28% to 18%
  • Also, trim rates on washing machine from 28% to 18%
  • Cut rates on grinders, mixers, water cooler & scents from 28% to 18%
  • Tax rates fall to 5% for footwear under Rs.1000
  • Trim rates on paint from 28% to 18%
  • Cut rates on bamboo flooring to 12%

On Services

  • GST council reduced the tax rate to 5% on urea imported from other countries
  • GST tax rate on e-books fall down to 5% from 18%
  • GST registration the last date extended to 31st August also the penalty for late registration will not be charged
  • Composition scheme threshold limit set to 1.5Crore while the previous one is 1Crore
  • Cut rates on ethanol from 18% to 5%
  • Taxpayers will receive a discount on digital payments for taxpayers who pay tax through online mode
  • Now employers who are paying GST on insurance, food, travel & other benefits provided to employees can claim ITC.

Next 29th GST meeting will set to 4th August and the prime discussion will be on MSME sectors like the problems faced by startups, entrepreneurs etc.  Also, the council will discuss sugar cess.

GST council has planned to keep luxury items on 28% slab to reduce the tax burden on frequently purchased goods & items.

More business-friendly: Govt proposes clutch of amendment to GST law

More business-friendly: Govt proposes clutch of amendment to GST law

To iron out issues concerning implementation of the goods and services tax (GST), the Centre on Monday proposed several pro-business amendments to GST laws suchGST Law as restricting GST liability under reverse charge basis on procurements from unregistered vendors to specified class of registered persons to be notified by the GST Council and allowing businesses to have separate registration for each place of business in a state. Also, the input tax credit entitlement on vehicles will be relaxed to cover the passenger vehicles having the seating capacity of not more than thirteen persons, in case these are used for specific (rather than personal) purposes. So ITC will now be available for dumpers, work-trucks, fork-lift trucks and other special purpose vehicles.

While the changes are termed business-friendly and supportive of ease of doing business, sections of the industry could be affected by the provisions relating to restriction on transfer of credit balance of education cess, secondary and higher education cess, Krishi Kalyan cess, additional duties of excise (textile and textile articles) etc. “Specific denial of transition of credit of cesses like education cess etc would be against the tax position that some taxpayers had taken,” said Abhishek Jain, tax partner, EY India.

Pratik Jain, partner and leader, Indirect Tax, PwC, said: It is a welcome step to invite public comments for the proposed amendments to the GST law. The amendments such as amendment in the definition of supply, widening of credits on vehicles and restricting reverse charge liability for procurements from unregistered vendors to the specified set of persons are welcome.”

He, however, added that the proposed amendments do not cover some of the amendments which were already highlighted to the GST Council such as the tax liability on services deemed to be provided by the branch offices to foreign offices/parents. “It would be interesting to see which provisions are proposed to be given retrospective effect and which are given effect prospectively, Jain said.

In all, the Centre’s draft proposals to amend GST laws contains 46 amendments on which the public could give their suggestions till July 15. Significantly, an option is proposed to be given to every person to obtain separate registration for each place of business in a state. Previously, a single registration is required to be obtained for all the places of business in a state, except when they were operating as a separate business vertical. Further, the provisions for individual registration of multiple SEZ units have also been proposed to be introduced.

In a tax-payer friendly amendment, it is now proposed to allow ITC in respect of food and beverages, health services and travel benefits to employees, which are obligatory for an employer to provide to its employees under law. Merchant sale transactions where the goods do not enter India, sale of goods stored in customs bonded warehouse and high sea sales transactions are specified as transactions which do not amount to supply of goods as well as services, resolving the ambiguity of treatment of such transactions.

As reported by FE recently, a group of ministers (GoM) led by Bihar deputy chief minister Sushil Modi is set to recommend to the GST Council that a section in the GST Act concerning the reverse charge mechanism be scrapped as “it discriminates against unregistered dealers while not adding much to the revenue.” Under the RCM rule, registered dealers are now required to make tax payments in case they procure goods from unregistered ones. This has been resisted by the registered small businesses as they find it cumbersome to comply when goods are purchased from dealers outside the GST ambit. Since the GST’s rollout in July last year, RCM has remained suspended and has recently been further deferred till September 30.

The amendments also seek to give effect to some of the decisions taken by the GST Council in the past like raising the turnover threshold for availing composition scheme increased from Rs 1 crore to Rs 1.5 crore. In the suggested amendments, definition of supply is proposed to be amended to remove specific inclusion of activities referred to in schedule II to remove an anomaly that in some cases, even though the activity specifically mentioned in schedule II did not amount to supply, due to deemed inclusion of such activities in definition of supply, it attracted tax.

Source : Financial Express
GST panel recommends no extra tax incentives for digital transactions

GST panel recommends no extra tax incentives for digital transactions

A ministerial panel headed by Bihar Deputy Chief Minister Sushil Modi on Sunday decided to recommend to the Goods and Services Tax (GST) Council to take the final call on the way reverse charge mechanism will be applicable.

Concerns related to revenue prompted another ministerial panel, also headed by Modi, to defer GST discount to consumers making digital payments for about a year.

On May 4, the Council had discussed the proposal of giving a concession of two percent in the GST rate (where tax rate is three percent or more) on B2C supplies, for which payment is made through cheque or digital mode. In that case, the ceiling for the discount will be capped at Rs 100 per transaction.

While the Group of Ministers (GoM) is in favour on incentivising digital payments, PM Modi said it is better to wait for some time till revenue stabilises further.

The GoM, hence, recommended the GST Council to defer the incentives for now.

The GST Council will decide on businesses that will have the liability to pay tax on reverse charge. Towards this, the GoM has suggested deleting sub-section (4) of section 9 of the Central GST (CGST) Act, 2017.

The ministerial panels will submit their report to the GST Council that is expected meet on July 21 in New Delhi.

Since the implementation of goods and service tax in July last year, reverse charge mechanism – one of the key measures against tax evasion – has been deferred thrice and this time till September 30.

Earlier during the year, some states had insisted that the reverse charge mechanism should be re-introduced, as it will help tax authorities plug revenue leakages. Thereafter, a GoM headed by Modi was formed to decide on the exact shape and form of RCM if the government decides to implement it.

Reverse charge is a mechanism where the recipient of the good or service will have to pay GST, which is otherwise paid by the supplier. The charge is applicable on a registered dealer if he buys goods from a dealer not registered under GST. However, the receiver of the good is eligible for input tax credit, while the unregistered dealer is not.

Registered taxpayers (supplier) were not willing to take the burden of paying tax, while small or unregistered taxpayers were running out of business as these registered dealers were hesitant to buy goods from them. Keeping this in mind, GST Council in October, 2017 had temporarily suspended RCM, as it was increasing compliance burden on taxpayers.

Source: Money Control
GST Council working towards reducing tax rates: MoS Finance

GST Council working towards reducing tax rates: MoS Finance

The GST Council is working towards rationalising Goods and Service Tax (GST) rates,GST Council: sp shukla Minister of State for Finance Shiv Pratap Shukla said on Thursday.

A big announcement from the government regarding GST is imminent, he said at an event.

Currently, the GST has four rates of 5 per cent, 12 per cent, 18 per cent and 28 per cent.

The all powerful GST Council had, in its meeting in January, decided to slash the GST rate on 54 services and 29 items.

In its November 2017 meeting, the council had removed 178 items from the highest 28 per cent category while cutting tax on all restaurants outside starred-hotels to 5 per cent.

He further said the government is working to promote the growth of SME as it is an important sector to the economy including in output, employment and exports.

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Source: Business Today
Government simplifies GSTR-3B filing, here’s what has changed

Government simplifies GSTR-3B filing, here’s what has changed



The government on Wednesday came out with a simplified version of GSTR-3B, making it more user-friendly amidst indications that it may possible be used even beyond March 31.

According to a note prepared by PwC, GSTN has made the following key changes in the process of filing GSTR 3 B:

1. Tax payment – Earlier, a taxpayer was required to Submit the return to ascertain the tax liability amount. Post submission, no changes were allowed. Now, the tax liability to be paid in cash/ credit will be shown before submitting the return.

2. Challan generation – Tax payment challan can now be auto-generated after offsetting the input tax credit available in credit ledger. Taxpayer, however, has an option to edit the credit amount to be utilized and not to consider the system generated credit utilisation. Earlier, the assessee had to manually fill in the credit utilization amount and generate the challan.

3. Download facility of draft return – A new feature of downloading draft return at any stage has been provided to verify the saved details offline.

4. Auto-fil of tax amount – Taxpayer now need to fill either CGST or SGST/UTGST amount, other tax will get auto filled.

Also Read: Technical Challenges For Implementation Of GST

Further, detailed user manuals providing step wise details of the return filing process has been made available to businesses.

“This is a welcome step towards making the tax filing process more user friendly. It makes the system less rigid and reduces the chances of inadvertent errors. With this, hopefully, the businesses would find it easier to file returns which would in turn increase the level of compliances. It also indicates that the Government intends to continue with monthly Form 3 B returns post March 2018 as well,” says Pratik Jain, Partner & Leader, Indirect Tax, PwC.

According to Archit Gupta, Founder and CEO, ClearTax such changes will make filing simpler and faster and reduce manual input to tax payment which could throw off errors. “Several user friendly changes have been made in the GSTR-3B filing flow. Now users can view their tax liability before submitting. And view cash/credit ledger offset available to them and the tax to be paid before submission of their GSTR-3B return.”

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Source :  The Economic Times
GST rate cut: From diamonds to used cars, here’s full list of revised items

GST rate cut: From diamonds to used cars, here’s full list of revised items

GST rate cut

Two weeks ahead of Budget 2018, the Goods and Services Tax Council on Thursday cut rates on 83 employment-oriented goods and services, in a bid to encourage greater compliance as revenues have dipped since the landmark reform was announced in July. The panel, headed by Finance Minister Arun Jaitley and comprising representatives of all states, at its 25th meeting decided to reduce tax rate on 29 items and 54 categories of services with effect from January 25. Businesses have raised concerns about high rates of taxation and cumbersome processes in GST, billed as India’s biggest tax reform in 70 years.

Also read: 25th GST Council Meet:Rates revised for 29 goods, 53 services, says Arun Jaitley

The goods on which GST will be lowered include biofuel-run buses, used motor vehicles and diamonds and precious stones.

Here’s the complete list:

List of goods on which GST rate recommended for reduction from 28% to 18%

Old and used motor vehicles on the margin of the supplier, subject to the condition that no input tax credit of central excise duty/value added tax or GST paid on such vehicles has been availed by him.

Buses, for use in public transport, which exclusively run on bio-fuels.

List of goods on which GST rate recommended for reduction from 18% to 12%

Sugar boiled confectionary Drinking water packed in 20 litters bottles Fertilizer grade Phosphoric acid Bio-diesel Bio-pesticides Bamboo wood building joinery Drip irrigation system including laterals, sprinklers Mechanical Sprayer

List of goods on which GST rate recommended for reduction from 18% to 5%

Tamarind Kernel Powder Mehendi paste in cones LPG supplied for supply to household domestic consumers

List of goods on which GST rate recommended for reduction from 12% to 5%

Articles of straw, of esparto or of other plaiting materials; basketware and wickerwork

List of goods on which GST rate recommended for reduction from 3% to 0.25%

Diamonds and precious stones

List of goods on which GST will not be charged

Vibhuti Parts and accessories for manufacture of hearing aids De-oiled rice bran

GST rate cut on services

In the services segment, government will cut taxes on transportation of crude, gasoil, gasoline, jet fuel and services relating to mining, exploration and drilling of oil and natural gas, among other things.

Admission to theme parks, water parks, joy rides, merry-go-rounds, go-carting and ballet will now be taxed at 18% instead of 28% and on common effluent treatment plans services from 18% to 12%.

List of goods on which GST rate recommended for increase from nil to 5%

Rice bran (other than de-oiled rice bran) Cigarette filter rods

Loss to the exchequer

GST rate cut will hit the exchequer by Rs 10-12 billion annually.

Reason for rate cut

The Council veered around the idea of making the GST return filing process simpler to ease compliance burden for small businesses.

GST Panel also decided to divide Rs 350 billion (Rs 35,000 crore) IGST collections between centre and states.

Petrol, crude oil may come under GST ambit

Finance Minister Arun Jaitley said the next meeting of the Council may consider bringing items like crude oil, natural gas, petrol, diesel, ATF and real estate within the GST purview.

While GST collections have been coming down and reached a low of Rs 800 billion in November, direct tax collections have given the government much-needed help. Direct tax collections grew 18.7 per cent till January 15, against the Budget target of 15.7 per cent for 2017-18. These would be reflected in the Revised Estimates of 2017-18 in the Budget.

To ease the flow of funds for both the Centre and states, the Council also decided to distribute Integrated GST (IGST) of Rs 350 billion equally between them.

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Source :  Business Standard