Only 50 sin & luxury goods to stay in 28% slab. Returns filing rules simplified to ease compliance burden.
The GST Council cut rates on 178 items to 18 percent from 28 percent on Friday, slashed taxes on all standalone restaurants to 5 percent, simplified return filing procedures for small firms in one of biggest changes in rules and rates since the new system kicked in from July 1.
The Goods and Services (GST) Council, which met in Guwahati, has decided to cut keep only 50 luxury and 'sin' goods like tobacco in the highest slab, paving the way for price cuts in raft of commonly used goods from furniture to sanitary ware, electrical fittings, detergents, marble flooring and toiletries
Except for white goods, some auto parts, aircraft parts, yatch-related products, cement, paint and some other products, the GST rate on all other items have been placed in a lower slab.
The GST rate on two items— wet grinders, armoured fighting vehicles—have been cut from 28 to 12 percent. Taxes on six items have been cut from 18 to 5 percent, in eight items from 12 to 5 percent and from 5 to zero percent in six items.
The tax cuts will have a revenue implication of about Rs 20,000 crore, sources indicated.
The council also simplified procedures, and several changes to make the 'Composition Scheme' more attractive.
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The GST Council — the apex body for decision making headed by finance minister Arun Jaitley — also decided to impose a uniform GST rate of 5 percent across all categories of standalone restaurants — air-conditioned and non-air-conditioned — but withdraw the benefits of input tax credit (ITC) from such businesses.
Jaitley said that the council has noted that no restaurants were passing on the benefits of ITC to customers and had linearly raised their meal rates after GST became effective from July 1.
Input credit means at the time of paying tax on output, a producer, trader or service provider can reduce the tax already paid on inputs.
“The council noted that, after GST restaurants did not pass it on to customers. GST was was being charged on existing meal rates,” Jaitley said, obliquely hinting that the government would not hesitate to invoke the anti-profiteering clause and clamp down on business found to be not passing on the benefits to customers.
“The GST rate for all restaurants, AC and non-AC, irrespective of turnover, will now be 5 percent,” Jaitley said. “Since they did not pass on benefits, no restaurants will be eligible for ITC henceforth,” he said.
Restaurants in starred hotels and outdoor catering services will attract a GST of 18 percent along with ITC benefits.
Jaitley also said that the annual turnover threshold on the composition scheme will be raised from Rs 1 crore to Rs 1.5 crore. This will be done after the law is amended to raise the turnover ceiling for eligibility of composition.
“The law will be amended to raise the ceiling to Rs 2 crore. The limit will be raised immediately after the law amended to Rs 1.5 crore,” finance secretary Hasmukh Adhia said.
Under the scheme, traders, manufacturers and restaurants can pay tax at 1, 2 and 5 percent, respectively. Adhia said that the council has also decided to fix a uniform rate of 1 percent for traders and manufacturers.
The move to widen the turnover threshold is aimed at easing the compliance burden for taxpayers as they will have to file returns only once in a quarter as against monthly returns that needs to be filed by other normal taxpayers.
However, dealers cannot avail input tax credit, unlike a normal taxpayer.
Also, traders availing the composition scheme on goods, who also provide small services upto Rs 5 lakh annually, will not be considered ineligible for the scheme.
In another significant decision aimed at easing compliance and simplifying procedures, tax assesses will now be required to file only two sets of forms— GSTR1 and GSTR 3B — instead of four earlier. While small taxpayers with an annual turnover of less than Rs 1.5 crore will file quarterly returns (once in three months), those with a higher turnover will file monthly returns, Jaitley said.
The council also sharply reduced the penalties on late filing. Those will `Nil’ returns or no tax liability the fine has been reduced from Rs 200 per day to Rs 20 per day, while for others the late filing charges have been cut from Rs 200 per day to Rs 50 per day.
All the changed rules, except for the higher composition scheme turnover threshold, will be applicable prospectively from November 15.
The reduction in rates and simpler rules comes weeks ahead of the Assembly polls in Gujarat where GST and its teething problems has become a major electoral rallying points for state elections scheduled for December 4 and 11.GST, billed as the country's biggest indirect tax overhaul, has consolidated a dozen of state and central duties into one single levy. All goods and services have been fitted into four broad slab structure — 5, 12, 18 and 28 percent —along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks.