The GST council brought big cheers for the common man on Christmas by slashing down the tax rates on 23 items. This includes movie tickets, TV and monitor screens and power banks, and exempted frozen and preserved vegetables from the levy.
Finance minister Arun Jaitley said that the slashed rates are likely to come into effect from January 1, 2019.
Of the 23 goods and services on which rates have been slashed, the tax rate on seven items in the 28 percent slab has been brought down. With this, only 28 goods are left in the highest 28 percent tax bracket.
The goods on which GST has been lowered to 18 percent from 28 percent at present include pulleys, transmission shafts, and cranks, gearboxes, retreaded or used tyres, power banks of lithium-ion batteries, digital cameras, video camera recorders, and video game consoles.
The 28 percent slab is now restricted to only luxury and sin goods apart from auto-parts and cement – the tax rate on which could not be cut due to high revenue implication.
“Rate rationalization is an ongoing process. When the original rates were fixed, India had the most irrational taxation rates. Most of these items were charged, along with the cascading effect, at 31 percent. So we had only transiently put them at 28 per cent because if we had immediately brought it down then the revenue impact would have been there and therefore the social expenditure of central and state governments would have suffered.
“So, therefore, we followed a more realistic pragmatic and a prudent policy that as the revenues move up and affordability increases we gradually bring it down. And therefore 28 percent bracket is already moving towards a sunset, except the luxury and sin items, 3 items which are used by the upper-income group and only 1 item of common use remains,” Jaitley said
Apart from luxury and sin goods, mass use item cement and white goods like air conditioners and dishwashers are left in the 28 percent slab.
“The next target will be rate rationalization in cement as and when affordability improves, Jaitley said, adding reducing GST on cement would have cost an annual Rs 13,000 crore to the exchequer.
The annual revenue implication of the rate cuts would be Rs 5,500 crore, he said.
GST on movie tickets costing up to Rs 100 cut to 12 percent, from 18 percent, tickets over Rs 100 to attract 18 percent GST, against 28 percent earlier. This will have an annual revenue implication of Rs 900 crore.
Monitors and TV screens up to 32 inches and power banks will attract 18 percent GST, as against 28 percent earlier. The annual revenue loss on account of this would be Rs 1,500 crore.
The rate rationalization comes after Prime Minister Narendra Modi on Tuesday indicated that the 28 percent slab of GST would only be restricted to a few select items, such as luxury and sin goods and said his government wants to ensure that ’99 percent items attract 18 percent or lower GST.
The other items which will now attract 18 percent tax include pulleys, transmission shafts, and cranks, gearboxes, retreaded or used tyres, power banks of lithium-ion batteries, digital cameras, video camera recorders, and video game consoles. These items currently attract a 28 percent rate.
The GST Council has also decided to slash the tax rate on parts and accessories for the carriages for disabled persons from 28 percent to 5 percent. Also, third-party insurance premium of goods carrying vehicles has been reduced from 18 percent to 12 percent.
The other items will attract a lower GST rate of 5 percent includes marble rubble, natural cork, walking stick, fly ash blocks.
Music books and vegetables (uncooked or cooked by steaming or boiling in water), frozen, branded and put in a unit container and vegetables provisionally preserved but unsuitable in that state for immediate consumption have been exempted from GST.
Services supplied by banks to Basic Savings Bank Deposit account holders under the Jan Dhan Yojana will not attract GST.
Air travel of pilgrims by non-scheduled/charter operations being facilitated by the government under bilateral arrangements will attract a lower GST rate of 5 percent.
The Council has decided that 5 percent would be levied on renewable energy devices and parts for their manufacture.
When asked about his message to the industry to pass on the rate cut benefits, Jaitley said, “There is already anti-profiteering authority, which has been more than active. Of course, they have to pass on the rate benefits. Or we will do what we did in case of restaurants”.
The finance minister further said that the Council has decided that businesses which are supposed to pay GST and file returns but have not done so far, should file it by March 31, 2019, to avoid penalty.
Revenue Secretary Ajay Bhushan Pandey said that the new return filing system will be launched on trial basis from April 2019 and would be made mandatory from July 1, 2019.
The GST Council has also decided to set up a centralized Authority for Advance Ruling to hear those cases in which two divergent verdicts have been passed by AARs of two different states.