The third GST Council meeting since the implementation of Goods and Services Tax in India brought a spate of good news for exporters and small businesses, but also had something to offer to consumers as well, albeit less than what was widely expected. The GST Council, headed by Finance Minister Arun Jaitley, reviewed the rate of tax under GST on as many as 27 goods and services, mostly lowering the tax on these items of common use. However, the number of items discussed for a review of rates in Friday’s meeting in New Delhi was far lower than the 60 items under review, on which the government was expected to cut taxes.
The GST Council, in its last meeting on September 9 in Hyderabad, had lowered tax on as many as 40 daily use items of the 100 items identified. The council had then lowered the GST rates for a number of daily-use products ranging from idli/dosa batter to kitchen gas lighter. There was speculation that the government would take up all the remaining 60 items in today’s meeting.
Instead, the council chose to focus on straightening out administrative and procedural difficulties in implementation of GST, which have brought the businesses of exporters and SMEs to near grinding halt, and make the reform smoother and simpler. The council responded favourably to the the call by small businesses to lower the compliance burden by allowing them to file returns only once in a quarter instead of once every month as is required at present. Further, for exporters reeling under tight liquidity conditions due to tax refund claims aggregating to Rs 65,000 crore stuck with the government, the GST Council took steps to provide them relief by allowing pre-GST exemptions for them till March 2018.
As for reducing the tax burden on consumers itself, here’s a list of the items on which the government cut rates today:
Government contract works involving high amount of labour will also be now levied 5% GST instead of 12% in order to contain cost of those programmes. The step will ostensibly correct an anomaly in the form of higher tax rates on inputs for goods or services which have lower tax rates. This situation has resulted in very high input tax credit claims in the months following the implementation of GST.
Other than this, Finance Minister Arun Jaitley said that the Group of Ministers (GoM) on GST will take a second look at 18% GST charge on air-conditioned restaurants with turnover of more than Rs 1 crore. The council today also cut GST rate on gas stove from the current 28%. As for services, those providing contractual services with revenue of up to Rs 20 lakh have also been exempted from iGST.
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