To defy the industry’s anticipation and belief of the GST legislation being incongruous to a reform it had been touted as, various modifications have been undertaken to the GST legislation from time to time. With the same intention/goal and the current government’s conviction of attending to general industry and common man issues, the GST Council has been meeting quite frequently to debate and suggest measures and modifications to the GST legislation—one of the significant meetings being the one convened on November 10. While in the long term, GST should have had quite a favourable impact on most sectors in the Indian economy, the short-term impact of the proposed legislation seemed quite limited, with industry and common man encountering more of hardships than comforts. To address these adversities and countering a possibility of India witnessing an inflationary impact during the interim phase, the GST Council, after much debate and deliberation during its 23rd meeting, announced a whole raft of positive measures/modifications to the GST legislation—ranging from reduction in rates for various products to liberalisation of penalty measures and the Composition Scheme. Of the various propositions, one modification that is expected to have a considerable relief across businesses has been the deferment in time-lines/submission of various statutory filings. The GST Council’s decision to review the time-lines for filing of consolidated monthly return (GSTR-3) and inward supply return (GSTR-2), and the mechanism for matching of the inward supply return with outward supply reported by the supplier came as a significant relief to all industry players who have or were expecting to expand significant man-hours reconciling their purchases to those auto-populated basis disclosure made by the supplier.
On a lighter note, this would as well help in addressing the recent hijacking of GSTN Helpdesk’s mailbox with issues sent by various industry players on matching of GSTR-2A and actual purchases. In addition to the above, prescribing close to a 40-day period vis-a-vis the earlier proposed 10-day period also comes as a significant relief to the businesses by providing a breather for reconciliation of monthly accounts with those to be reported in GSTR-1. Further, extension of due date for original filing and revision of GST form Tran-1 for transitioning of credits also comes as a welcome measure, by providing additional 30 days to redress and reconcile the credits to be transitioned from the previous tax regime. Similarly, extension of due dates for filing of return by dealers who have opted for composition scheme and reporting of job-work-related movements as well comes as a significant relief for some businesses. With prospects of GST witnessing softening of prices across sectors affecting the common man, the GST Council has proposed a reduction in rates for various goods and some services as well.
Here is a look at some of these rate changes and their expected impacts. The GST rate for restaurant services, both air-conditioned and non-air-conditioned (except those restaurants in hotel premises having room tariff per day of more than `7,500), have been lowered to 5% from the earlier 18% or 12%. However, the lower rate of 5% brings with it a restriction of no credits being available to the restaurant for various expenses, including rent, which forms a significant part of the cost of the restaurant. Hence, even while the rate of GST has reduced for restaurants, the restaurant’s bottom line could see a dip on account of credits not being available. Accordingly, whether this rate change would entail a positive effect on the restaurants and their related menu prices still remains cynical, with the same varying from restaurant to restaurant, basis the margin as well as the proportion of non-GST supplies.
In the earlier proposed rates of GST, a chunk of procurements by the power sector has been prescribed in the 28% bracket, thereby founding anticipations of a significant increase in the tariff rates of electricity. Aligned to the government’s promise of reduction of a common man’s expenses, various products like cables, insulators, panels and relays have been recategorised under the 18% tax bracket vis-a-vis the earlier proposed 28%. Similarly, the GST Council meeting concluded with a heap of benefits for the airline sector, with the same ranging from lowering of rate for aircraft tyres, seats and engines to clarifications on availability of credit of aircraft engines, parts and accessories for discharging GST payable on stock transfer of such goods. All of these should aid in subsiding quite a bit if tax costs are being apprehended by the airline sector.
While the 23rd GST Council meeting did conclude with a whole raft of positive measures for various sectors, it did not have much of it in store for the automobile industry. The rates for automobiles and most of its parts except rubber tubes, bearings and gaskets remain unaltered. While this would not have had much of an impact on car manufacturers as the same was creditable, a reduction could have lowered prices for the retail market of such parts and thereby entailing lesser of a prick in a common man’s pocket for maintenance-related expenditure. A commoner could now expect quite a cutback on purchases like chocolates including chocolate wafers, pasta, condensed milk, idli and dosa batter, etc. To illustrate, a chocolate that earlier cost Rs 50 should cost approximately Rs 4 lesser with the decrease in tax rates; the same, however, may vary from business to business, depending upon the possibility of passing on of such benefits by chocolate manufacturers.
Similar reduction in tax rates from the earlier 28% to 18% have been proposed for detergents, shampoos, shaving creams, deodorants and perfumes as well, lessening the pricking of pockets for cosmetic expenditures. The GST Council concluded with some good news for the bespectacled commoner as well, with reduction in rates of tax for spectacle frames. Separately, the GST Council, aligned to its negative outlook towards deleterious goods, did not propose any alternation to rates of tax on ‘sin goods’, which essentially include aerated drinks, cigarettes and other tobacco products. This would entail smokers still carbonise quite a bit of additional cash for every roll-up. All in all, the GST Council meeting did end with quite a number of pleasant outcomes and did not hurl any unpleasant surprises for most products/industries. With the current government’s concerted efforts for reducing hardships for most businesses including enabling of anti-profiteering and other corrective measures and addressing genuine concerns, India may soon see itself embracing the utopian indirect tax regime.