GST block buster: 33 items pushed down tax ladder

Bringing New Year's cheer to the commoner set to cast the ballot in general elections a few months from now, the government clipped rates of 33 common goods including entertainment and digital paraphernalia on Saturday.

The taxpayer also found solace as the Goods and Services Tax Council resolved to simplify the returns filing procedure with a common ledger for all taxes and other payments.

Granting further relief, the GST Council announced extension of the deadline for filing annual returns, from March 31 to June 30.

But for all that, the Council did not tinker with existing rates on cement, auto parts, air conditioners and dishwashers, in order to avoid a major hit on indirect tax collections. These items have been retained in the highest tax slab of 28 per cent.

Finance Minister Arun Jaitley, who chaired the Council meeting, said a cut in cement rate from 28 per cent to 18 per cent would have hit GST revenue by Rs 30,000 crore. A similar slash in auto parts would have hit collection by Rs 20,000 crore.

In the highest rate slab, which consists mostly of luxury and sin goods, there now remain only two "common man" items — cement and air conditioners. The FM said this tax bracket was moving towards "sunset".

"We have cut six more items from the 28% bracket, bringing overall items in the category from 34 to 28," he said.

A few days before the Council meeting, Prime Minister Narendra Modi had hinted 99% of the items covered under GST would be moved to 18% or below.

A tax consultant who did not want to be named said close to 98% of the GST items were now at 18% or below.

MS Mani, partner, Deloitte International, told DNA Money the latest rationalisation has been done in a manner so revenues are not overly hit.

"The reductions indicate a desire to continue with rate rationalisation so that revenues are not significantly impacted. Further rationalisation would depend on the revenue buoyancy encountered as we move along the GST road," he said.

The annual revenue implication of the decision to slash GST rates for over 30 items would be Rs 5,000-5,500 crore. Of this, Rs 900 crore would be solely on account of making movie tickets cheaper.

GST on cinema tickets priced up to Rs 100 has been brought down to 12% from 18% and tickets costing more than Rs 100 to 18% from 28%.

The rate on third-party insurance premiums has been reduced to 12% from 18%.

GST on monitors, television screens, tyres and power banks of lithium-ion batteries are down to 18% from 28%. Accessories for carriages for specially-abled persons have seen a steep rate cut from 28% to 5%. Solar power plants will also be charged a lower GST of 5%.

The new rates will have the force of law from Januray 1.

Other major decisions of the Council were to create a centralised appellate advance ruling authority to deal with conflicting decision of two or more state advance ruling authorities (AARs), formation of group of ministers (GOM) on real estate sector rates and charging interest on net tax liability.

It would be looking at revision of threshold for GST registration and composition scheme for service providers in the next Council meeting in January.

Kamal Nandi, business head & executive vice president, Godrej Appliances and president of Consumer Electronics and Appliances Manufacturers Association (CEAMA), said GST rate snip on TVs and other items from 28% to 18% will propel demand

He was, however, disappointed with the government's decision to retain ACs in the highest slab. "Lowering the tax slab would have made air conditioners more affordable and helped in market penetration, which at the moment is still low at 4%. It would have helped offset the price pressure and spurred demand for ACs, which has seen de-growth this year."