Cess on large luxury cars raised to 20 percent, SUVs to 22 percent and mid-sized sedans to 17 percent from a uniform 15 percent earlier; status quo on 1200 cc petrol, 1500 cc diesel cars, hybrid cars and 13-seater vehicles.
The goods and services tax (GST) Council on Saturday extended the deadline for filing the first set of returns by month to October 10, a move that will likely soothe frayed nerves of millions of traders who have been struggling to upload invoices in the new tax system’s portal.
The Council, which met in Hyderabad, also raised the cess on large luxury cars to 20 percent, SUVs to 22 percent and mid-size sedans to 17 percent from 15 percent for each of these categories, raising prospects of some types of premium vehicles getting dearer ahead of the festive season.
The cess on two categories— 1200 cc petrol and 1500 cc diesel—will remain unchanged at 1 percent and 3 percent, respectively. Likewise, the cess will remain unchanged for hybrid cars and 13-seater vehicles, finance minister Arun Jaitley told reporters after the council’s 21st meeting.
The government has promulgated an ordinance for raising the cap of cess on SUVs, mid-sized and luxury cars from 15 percent to 25 percent.
The council also cut GST rates of 40 items. “These (the rates) were in some higher category. In some cases the rates have been brought down to from 28 to 18 percent, in some cases from 18 to 12 percent and in some cases from 12 to five percent,” Jaitley said. “Reduction in rates were required,” he said.
These include goods such as tamarind, roasted gram, custard powder, dhoop, agarbatti, raincoats and rubber band. In the case of raincoats, the GST rate has been brought down from 28 to 18 percent, while for rubber band it has been cut from 28 to 12 percent, the finance minister said.
The council also decided on a strategy to deal with food sellers who have stopped selling the packaged grain in a bid to stay out of the GST net.
Unbranded food is not taxed, while registered branded food such as rice attract 5 percent tax under the new indirect tax system that rolled out from July 1. Many businesses, therefore, were deregistering their brands to avoid the levy.
“A section of the food industry were deregistering their brands, or started selling under their corporate name. This created an inequality in trade,”Jaitley said.
The new mechanism will deal with businesses that are deregistering their brands to evade GST.
The council has fixed May 15, 2017, as the cut-off date for considering a brand as registered for the purpose of levy of GST, irrespective of whether or not the brand is subsequently deregistered.
“If on May 15, 2017 you have a registered trademark, you will have to pay 5 percent GST. If you have a mark or a named, in entitles you claim exclusivity, then a 5 percent GST rate will be applicable,” the finance minister.
The council also decided that handicraft artisans with annual earnings of upto Rs 20 lakh will not require separate GST registrations for selling goods in different states. Similarly, certain category of job works that involve inter-state supply of services, will not require separate GST registrations.
The council has also decided to reduce rates on certain categories of handicraft. Besides, khadi products sold through Khadi and Village Industries Commission (KVIC) stores will be exempted from GST.Under the new deadlines, the sales return or GSTR-1 for July will have to be filed by October 10 instead of September 10 earlier, while deadline for GSTR-3B—a self-declaration form—have been extended by four months.
This will give tax payers extra time to file returns without worrying about penalties and fines for late filing that have been waived off.
Under GST, taxpayers are required to file returns on “onward supplies” (goods sold or services provided) and “inward supplies” (goods or services bought). These returns are necessary for seamless implementation of the input tax credit system.
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 has also formed a committee of ministers for looking into the problems traders and taxpayers are facing in using the GSTN portal, the information technology (I-T) backbone of the new tax system.
Industry bodies and traders have repeatedly sought more time to enable glitch-free filing of returns, minimise erroneous entries and the get accustomed to the GST Network (GSTN).
GSTN is a portal-driven IT backbone created to enable real-time taxpayer registration, filing returns, handle invoices, execute inter-state tax settlements, and connect states for two-way data flow.
It is equipped to handle 2.6 billion transactions every month from an estimated 8 million GST tax payers. It can scale up to handle double the volume (5.2 billion transactions a month) and upto 13 million tax payers, without any change.
The readiness of GSTN have come under question, with many states complaining about the state of under-preparedness of GSTN.
“It has got overloaded because all banks were filing their returns yesterday. These are transient challgenes that normally takes place in technology,” Jaitley said.The finance minister said overall GST revenue collections have been robust, with collections of Rs 95,000 crore from July, which does not include the spill over from June. He said that of the Rs 48,000 crore integrated GST collections, Rs 10,000 crore have already been paid.