The GST Council on Wednesday decided to accept the group of ministers’ interim reports on the correction of duty inversion and exemption. Pre-packaged and pre-labelled retail packs, including curd, lassi and butter milk, have been brought under GST. However, the GoM on casinos, online gaming and horse racing has been given time to re-examine the issues and submit its fresh report till July 15, thus deferring the proposal to levy a 28 per cent tax on these activities.
However, the GoM on tax slab rationalisation has been given time for three months to submit its report. The two-day 47th meeting of the GST Council, headed by Union Finance Minister Nirmala Sitharaman, took place on Tuesday and Wednesday in Chandigarh and the final decision of the Council was announced on Wednesday.
On the GST compensation cess, Finance Minister Nirmala Sitharaman on Wednesday told reporters that some states want this to continue for some time, if not five years but at least for some time. She added that some states also said they should find ways to compensate their resources themselves and not be dependent on central compensation.
Abhishek Jain, partner (indirect tax) at KPMG in India, said, “No decision on the extension of period for which the states should be compensated has been arrived at by the Council. While a few states demanded for the said extension, a few did not want to rely on compensation cess to meet revenue requirements. As such, the industry players will have to wait a little while more to understand the fate of compensation cess.”
Where GST Increased, Where Decreased
Goods and services tax (GST) was exempted on specified food items and grains, etc, when not branded, or right on the brand has been foregone. The Council has now recommended to revise the scope of exemption to exclude from it pre-packaged and pre-labelled retail packs, including curd, lassi and butter milk. Rates on some goods and services have also been changed. The rate changes recommended by the 47th GST Council will be made effective from July 18.
The Council has also decided to impose a GST of 18 per cent on the fees charged by banks for the issue of cheques (loose or in book form); bring hotel rooms under Rs 1,000 per day under the 12 per cent GST slab as opposed to tax exemption category currently.
Room rent, excluding ICU, exceeding Rs 5,000 per day per patient charged by the hospital will also be taxed at 5 per cent, without input tax credit. It has also decided to impose 12 per cent GST on maps and hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes, printed.
GST exemption on services extended by RBI, Irdai, Sebi, FSSAI and GST has also be withdrawn. GST on petroleum/ coalbed methane has been increased from 5 per cent to 12 per cent, that on e-waste has also been raised from 5 per cent to 18 per cent. The tax on scientific and technical instruments supplied to public funded research institutes has been raised from 5 per cent to the “applicable rate”.
The Council has reduced GST from 12 per cent to 5 per cent on ostomy appliances (including pouch or flange, barrier cream, sleeves, irrigator kit, micro-pore tapes, stoma adhesive paste, belt). It has also reduced the rate from 12 per cent to 5 per cent on orthopedic appliance (splints and other fracture appliances); artificial parts of the body; other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability; and intraocular lens.
IGST on import of diethylcarbamazine (DEC) tablets supplied free of cost for National Filariasis Elimination Programme, and IGST on specified defence items imported by private entities/vendors, when end-user is the Defence forces have become exempted.
GoM On Rate Rationalisation Given Extra Time
The group of minister on rate rationalisation has been given three months to examine the issue further.
KPMG’s Jain said that considering that the current revenue-neutral rate is short of the target rate of 15.5 per cent, new GST tax slabs may be expected. Additionally, the Council has proposed withdrawal of exemptions for a few supplies, alongside rate changes for a few supplies either to correct inversions or otherwise. “These amendments are expected to give a slight uptick to the GST collections.”
GoM On Casino, Online Games Given Extra Time
The GST Council has directed the group of ministers (GoM) on casinos, online gaming and horse racing, headed by GST Council Meghalaya Chief Minister Conrad Sangma, to further re-examine the issue and submit its report till July 15. For now, the Council has deferred the proposal to levy a 28 per cent tax on casinos, online gaming, horse racing and lottery.
Sitharaman on Wednesday said the Council was of the prima-facie view that the common thread connecting them is that these activities are in nature of “gambling” and should be taxed accordingly. She said a GST Council meet will take place to discuss the fresh report of the GoM in the first week of August.
GST’s IT Infrastructure
The GoM on IT reforms recommended that the GSTN should put in place the artifial intelligence/ machine learning-based mechanism to verify the antecedents of the registration applicants and improved risk-based monitoring of their behavior after registration, so that non-compliant taxpayers could be identified in their infancy and appropriate action be taken so as to minimise risk to exchequer.
GST Registration Waiver For Small Online Sellers
In a move that will benefit persons in the unorganised sector, the GST Council also decided to waive mandatory registration for small entities selling their products online. The exemption will be for those having an annual turnover of up to Rs 20 lakh and those not making any inter-state taxable supply. The changes will be effective from January 1, 2023.
The GST Council’s decision comes after the Supreme Court in its ruling last month said the Council is only a recommendatory body and its recommendations are not binding on the Centre or states. The apex court added that the Council’s recommendations will have a “persuasive value” and that both Parliament and the state legislatures can equally legislate on the matters related to GST.
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