GST Council cuts tax rate on 178 items; all restaurants to be taxed at 5%

The GST Council, which held its 23rd meeting in Guwahati on Friday reduced the tax rate on 178 items from 28 per cent to 18 per cent. GSTCouncil also brought all AC and non-AC restaurants in the 5 per cent GST bracket without the input tax credit (ITC). Only 50 items, mostly demerit, sin and luxury goods will be in the 28 per cent tax bracket.

All members of the GST Council felt that input tax credit (ITC) to restaurants is not passed on customers. Goods and Service Tax (GST) was being charged on existing rates which put additional tax burden on restaurant goers. Thus, we decided that restaurant industry will not get the benefit of ITC, Finance Minister Arun Jaitley said. 

Rates for all AC and non-AC restaurants will be 5 per cent. "Since they did not pass on the ITC benefit to customers, they will not be eligible for the benefit themselves," Jaitley added. Restaurants in hotels will cost the same, except in starred hotels which charge Rs 7,500 or more. The rate for restaurants in starred hotel will remain 18 per cent. Outdoor catering will be taxed at 18 per cent along with ITC, the Finance Minister added.

Taxpayers with turnover up to Rs 1 crore will have to file invoices once every quarter, whereas those with turnover above Rs 1 crore will have to file their invoices every month, Finance Secretary Hasmukh Adhia said in a press conference after the GST Council meet.

Finance Secretary Hasmukh Adhia said that tax payers with zero tax liability will now have it much easier. The GST Council has decided in today's meeting that filing of return for GSTR-3B will continue till march 2018. All taxpayers will have to file only GSTR-1 in the current year.

If there is a nil GST return to be filed, then the fine for late filing instead of Rs 200 per day will be Rs 20. For other taxpayers, it will Rs 50 per day instead of Rs 200. "At the same, we do not want people to be late as on the last day we get the data for IGST. Delayed filing might eat into states getting their share," Adhia said.

"Meanwhile, invoice matching will not be given up. Pending invoices for July to September will be filed by December," said the Finance Secretary. Additionally, GSTR-3B will be made simpler by making it more interactive, Adhia added.

Annual turnover eligibility for composition scheme will be increased to Rs 2 crore from the present limit of Rupees 1 crore under the law. Thereafter, eligibility for composition will be increased to Rs 1.5 Crore per annum, the Finance Ministry said in a release.

There will be a uniform rate of tax at 1 per cent under composition scheme for manufacturers and traders and no change for composition scheme for restaurant, the release added. Also, supply of services by composition taxpayer upto Rs 5 lakh per annum will be allowed by exempting the same.

While replying to a question on the revenue loss on account of GST, the Finance Minister said, "a lot of transitional credit is still blocked. I don't think a final word on the basis of first three months can be said."

Tax on diabetic food, pasta, curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasoning, condensed milk, spectacles frames was brought down to 12 per cent from existing 18 per cent.

Meanwhile, West Bengal Finance Minister Amit Mitra said aggregate revenue loss for Centre due to GST stood at Rs 60,000 crore and revenue loss for states is at Rs 30,000 crore.

"Lower 18 per cent GST will be levied on chewing gums, chocolates, after shave, deodorant, washing power, detergent, marble," Bihar Deputy Chief Minister Sushil Modi had earlier said. The all-powerful council pruned the list of items attracting the top 28 per cent tax rate to just 50 from 227 previously, Modi told reporters here. In effect, the council cut rates on 178 items.

Tax on pasta, jute bags and has been brough down from 18 per cent to 12 per cent.

"There were 228 items in the 28 per cent slab. The fitment committee had recommended that it should be pruned to 62 items. But the GST Council has further pruned 12 more items," Modi said. He said all types of chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoo, deodorants, washing powder detergent and granite and marble will attract lower 18 per cent tax rate.

"There was unanimity that in 28 per cent category there should be only sin and demerit goods. So, today the GST Council took a historic decision, that in the 28 per cent slab there will be only 50 items and the remaining items have been brought down to 18 per cent," he said.

Paints and cement have been retained in the 28 per cent tax bracket. "Luxury goods like washing machines and air conditioners have been retained at 28 per cent," Modi said. The decision taken by the GST Council will have a revenue implication of Rs 20,000 crore annually. "There is consensus that slowly 28 per cent slab should be brought to 18 per cent. But it will take some time because it has a big revenue implication," he said.

All taxpayers can file GSTR-4 till December 24. Forms for GSTR-5, GSTR-5A, GSTR-6 will be released on December 11, December 15, and December 31 respectively.

The tax cut was expected as Finance Minister Arun Jaitley earlier this week had hinted at bringing down the number of products in 28 per cent GST slab. While speaking at India Today Conclave, the Finance Minister said that some of the items should never have been in the 28 per cent slab. "We have been gradually bringing them down. The whole idea is, as your revenue collections neutralise we must prune it and that is the pattern in which the Council has so far been functioning. I see that as a future guide as far as the Council is concerned," Jaitley had said.

The GST Council in the last 3-4 meetings has slashed rates on over 100 items. According to the reports, the Council may reduce taxes on certain common use items such as handmade furniture, plastic products and daily use items like shampoo. There have been demands for lowering tax on wooden furniture as it is mostly handmade by unorganised sector artisans, with the middle class as the primary consumers. Other items in the same tax basket include shower baths, sinks, wash basins, bidets, lavatory pans, seats and covers, flushing cisterns and similar sanitary ware of plastics.

Earlier in October, Revenue Secretary Hasmukh Adhia had advocated for a complete overhaul of the tax rates under the GST regime. In an interview to PTI, Revenue Secretary said: "There is a complete overhauling that is required. It is possible that some items in the same chapter are divided. There is a need for harmonisation of items chapter wise and wherever we find there is a big burden on small and medium businesses and on common man, if we bring them down, there will be a better compliance."

Ever since the new tax regime came into being, the Council has reworked various provisions to make it more industry friendly. The turnover threshold for composition scheme, under which businesses can pay taxes at a nominal rate, has been hiked to Rs 1 crore, from Rs 75 lakh earlier. Items likely to see slash in tax rates are those used in every households, including sanitary ware, suitcase, wall paper, plywood, stationery articles, watch, play instruments, among others, said Modi, who heads a five-member GoM to monitor technology-related implementation issues of the GST. The objective behind lowering taxes is to give more relief to the small businessmen and consumers.

Govt to deploy skill trainers to help traders file returns

Meanwhile, the government has decided to deploy thousands of skill trainers who will help small businesses as well as individuals in fling returns as per the Central government's new guidelines. The Central Board of Excise and Custom's (CBEC) over 4,500 GST seva kendras will also help these people.

The step has been taken to help small traders after the government faced criticism for the multi-stage system that needs to be followed to file returns.

Instead of monthly returns, the Centre and the states could soon make it must to file returns quarterly. Under the government's composition scheme - apart from exemption from the filing of details such as invoices, and rebate on card or an electronic wallet payments - those with annual turnover of Rs 1.5 crore would have to just pay 1% tax flat.

(With inputs from PTI)