Before Gujarat elections where BJP has certainly lost ground among small traders and its weakening favour among common man in other parts of the country due to increasing economic hardships, the government has chosen to reduce the burden of top GST rate of 28% on people. Finance Minister Arun Jaitley announced at a press briefing after the GST Council meet in Guwahati on November 11, 2017, “Out of 228 items in the 28% tax bracket, 178 have been put into the lower tax category of 18%, which include chocolates, chewing gum, shaving cream, aftershave kits, beauty products, granite and marble. GST Council has lowered tax rates on a wide range of items, bringing down the number of items remaining in the highest slab of 28% from 227 to only 50. The GST Council has decided to keep only 50 items, mostly demerit, sin and luxury goods in the 28% bracket, he said, according to news reports from the meeting venue. The GST Council is likely to discuss lowering tax rates on dining in AC restaurants as well.
Among other items that have likely moved to the lower tax slab are handmade furniture and plastic products. All types of furniture used to attract a 28% tax under the GST. Wooden furniture is handmade by unorganised sector artisans and is mostly used by middle-class families and there have been demands for lowering tax incidence on them. Also, some items of plastic attracted 18% GST but goods such as shower baths, sinks, wash basins, bidets, lavatory pans, seats and covers, flushing cisterns and similar sanitary ware of plastics were under 28% levy.
To provide other relief to the small businesses, the council is also likely to allow taxpayers to file their returns on a quarterly basis instead monthly to make less burdensome. In a further relief to small and medium enterprises (SME), the panel is likely to rationalise tax rate in sectors where the total incidence of taxation has gone up because the goods were earlier either exempt from excise or attracted lower VAT rates in the previous indirect tax regime.
The GST regime slots items under four primary tax rate slabs — low rate of 5%, standard rates of 12% and 18%, and high rate of 28%. Other than this, gold and jewellery are taxed at a concessional GST rate of 3%, while rough diamonds are having a 0.25% levy.
The modified rates will come into force on November 15. The tax rate on two items have been reduced from 28% to 12%, 13 items have been reduced from 18% to 12%, while the rate on six items have been cut from 18% to 5% and that of eight items from 12% to 5%. Six items have gone from 5% to zero. The restaurant industry will not get input tax credit. The consensus in the Council has been that, even though restaurants have been given the benefit of input tax credits, they have not passed this to consumers. Tax rate will be 5% uniform for all AC or non-AC restaurants, except those in hotels with tariffs of more than Rs. 7,500, which will continue to be taxed at 18%. Outdoor catering will be taxed at 18% with ITC.
Congress leader P. Chidambaram said that a “shower of changes” was expected from a meeting of the GST (Goods and Services Tax) Council in Guwahati. He said that the “panic-stricken” Modi government would be forced to heed the advice of the Opposition and experts due to the coming Gujarat Assembly elections. A letter from the Finance Ministers of the Congress-ruled States to Union Finance Minister Arun Jaitley, who heads the Council, would set the tone for discussions in the meeting. “The letter exposes the structural flaws in the design and implementation of GST. The government can no longer duck these issues.”He added that the government had avoided debate and voting in Rajya Sabha on GST Bills but it cannot avoid a debate in the public domain or in the GST Council. He claimed, “Congress Finance Ministers will force changes in GST Council meeting. Agra, Surat, Tiruppur and other hub towns are watching. ”
It is notable that last week, several Finance Ministers demanded a major overhaul of GST, alleging that the tax reform measure had turned out to be a “big disappointment” due to its “poor” implementation with regard to GST’s concept, design, tax rates, exemptions, compliance requirement and technological preparedness. The Ministers from Punjab and Karnataka, Manpreet Badal and Krishna Gowda, alleged that the country had “lost the opportunity” to bring tax reform and that there was “utter chaos and confusion”, forcing many businesses to shut down.