GST Council cuts rate on 82 goods and services, introduces measures against tax evasion

Jan 20, 2018 11:01 IST
GST Council cuts rate on 82 goods and services, introduces measures against tax evasion

The 25th GST Council meeting chaired by Finance Minister Arun Jaitley on January 18, 2018 recommended rate cuts on 83 items including 53 services and 29 goods and the introduction of ‘anti-evasion measures’ to take care of faltering indirect tax revenue.

The goods and services that will sport cheaper GST henceforth include tailoring, old cars, bio-diesel, drip irrigation systems, precious stones and cooking gas. The new rates will come into effect from January 25, 2018.

According to an official release, the tax on old and used motor vehicles and buses running on bio-diesel would be lowered to 18 per cent from the current 28 per cent, while diamonds and precious stones will be taxed at 0.25 per cent and tailoring services at 5 per cent.

Key Highlights

• The GST council classified nearly 40 items as handlooms in order to protect the domestic industry and boost employment. The Fitment Committee of Officers will now finalise their rates.

• The council also held discussions on simplifying the return filing process and a final decision on the same will be taken in the next meeting through video conferencing.

• Discussions on the inclusion of items outside GST, including real estate, crude oil, natural gas and petroleum, will be taken up at the next meeting.

• Rates of goods such as bio-diesel, packaged drinking water, drip, irrigation system, bio-pesticides, among others have been brought down to 12 percent from 18 percent.

• Vibhuti and de-oiled brown rice will attract nil tax.

• Rates of 53 categories of services will also now attract lower tax.

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Besides this, the council also discussed revenue collections under the new levy and possible deterrent provisions. This would include the E-Way Bill, which will start from February 1. As many as 15 States have also decided to roll out intra-state bills from next month.

Further, to ease fiscal pressure on the finances of the Centre as well as states, the Council also decided that ₹35,000 crore from the Integrated GST collections would be distributed among them. According to Jaitley, the move will help ease the indirect tax positions of the Centre and the states. He stressed that the Centre is well ahead of its direct tax target and expressed hope that indirect tax collections will pick up as anti-evasion measures are put in place.

Reverse Charge Mechanism (RCM)

• The council will also consider the re-introduction of the reverse charge mechanism for dealers under the composition scheme, following recommendations by the law review committee.

• 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 the GST. However, the receiver of the good is eligible for input tax credit, while the unregistered dealer is not.

• While registered taxpayers were not willing to take the burden of paying tax, small or unregistered taxpayers would have run out of business if registered dealers did not buy goods from them.

• Keeping this in mind, GST Council in October had deferred the mechanism till April 1.

• Bringing composition dealers under RCM is a crucial anti-evasion measure as tax officials have found such dealers trying to escape paying taxes.

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Background

The 25th meeting of the Goods and Services Tax (GST) Council, the apex body for decision making for GST headed by Finance Minister Arun Jaitley, was particularly crucial as this was the last meet before the Union Budget 2018.

The change in rates will be applicable from January 25, 2018. Overall, the rationalisation exercise will have an impact of Rs 1,000-1,200 crore annually.

The process is expected to continue further, especially when it comes to the 28 per cent tax slab, which should only be for select luxury and demerit products.

GST rate on various mass consumption items reduced to 18 per cent

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