GST Council lowers tax rate on 66 items, offers relief to small entities

Insulin, schoolbags, colouring books and construction items are among the 66 items on which the Goods and Service Tax levy has been lowered.

The GST Council, meeting today for the 16th time, also gave traders, manufacturers and restaurants some relief by raising the cap on the ‘composition scheme’ to allow more small enterprises to opt for the scheme.

While the tax rate on insulin and cashew has been lowered to 5 per cent from the earlier 12 per cent, food items like pickles and ketchup will attract a tax of 12 per cent against the earlier proposal of 18 per cent ( see chart )

The Central Board of Excise and Customs will issue the revised rate structure soon.

The Council also increased the upper limit for the ‘composition scheme’ to ₹75 lakh from the earlier ₹50 lakh. Now traders, manufacturers and restaurants with an annual turnover of ₹20 lakh to ₹75 lakh can opt for the scheme and pay tax at one per cent, two per cent and five per cent respectively.

(The ‘composition scheme’ exempts tax payers with an aggregate turnover in a financial year up to ₹20 lakh — ₹10 lakh in North-East and special category states — from GST. An entity whose aggregate turnover in the preceding financial year is less than ₹75 lakh — earlier ₹50 lakh — can opt for a simplified ‘composition scheme’ where tax will be payable at a concessional rate on the turnover in a State.)

To promote regional cinema, the Council approved two categories of rates. While tickets of over ₹100 will attract 28 per cent, those priced less will be taxed at 18 per cent.

“The decision to lower rates was taken with the objective to maintain the equivalence with the current tax rates or due to the change in utilisation behaviour,” Finance Minister Arun Jaitley told the media, after the meeting.

The higher upper limit for the composition scheme will help small and medium enterprises. “It eases the burden on these categories as they are mass job creators,” the Minister said. Similarly, to promote outsourcing in the employment-intensive sectors of textiles, leather, diamond processing and jewellery, the Council approved a rate of 5 per cent on job work. However, the normal GST rate for the sector will continue to be 18 per cent, Jaitley said.

No relief for hybrid cars Despite representations by automakers to lower the GST rate on hybrid cars to 18 per cent, the Council did not seem to be in a mood to agree. Jaitley said the issue was examined in detail and a paper will soon be circulated to the GST Council members.

“However, the arguments being spread are not close to the facts,” he said.

The Council also approved the rules for accounts and records under GST. It will now meet on June 18 again to tie up the loose ends including deciding the tax rate on lottery and approving the proposed E-way bill.

Revenue Secretary Hasmukh Adhia said that the rules for the proposed anti-profiteering authority will be notified soon.

Industry seemed pleased with the revised rates, but said that the decision on the E-way bill has been left for too late. “This is likely to have a positive impact on various sectors like textiles, education, entertainment as their concerns on rates have been addressed,” said Harpreet Singh, Partner, Indirect Tax, KPMG in India.

Calling for a deferment of the proposed E-way bill by at least six months, Harishanker Subramaniam, National Leader (Indirect Tax), EY India, said its provisions should also be watered down.

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