GST Council slashing tax rates for 178 items is a belated measure to fix ailing economy
After much brouhaha over the messy and excessive tax slabs under the much tweaked around GST, the GST Council met today, November 10, in Guwahati, and decided to bring down taxation rates of as many as 178 items, retaining only 50 in the uppermost bracket to be taxed at 28 per cent.
In a major move that the Opposition, chiefly the uber-vocal Congress, would claim as its vindication, the Council slashed tax rates on a number of consumer items, such as chocolates, chewing gum, shampoo, deodorant, shoe polish, detergents, health drinks, cosmetics, among others, bringing it down to 18 per cent.
The GST Council head and Union finance minister Arun Jaitley addressed the media on the issue.
Only 50 out of 227 items on 28% tax slab now, says @arunjaitley in his media briefing https://t.co/4fqxBVUizL pic.twitter.com/DKpfYwuVug
— India Today (@IndiaToday) November 10, 2017
#WATCH Live: Finance Minister Arun Jaitley addresses the media after 23rd GST Council Meet in Guwahati, Assam. https://t.co/QaLHIC4db9
— ANI (@ANI) November 10, 2017
The Economic Times quotes Bihar finance minister and BJP MLA Sushil Modi, who heads panel on the GST Network, as saying: “There were 227 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 to more items. Now all types of chewing gum, chocolates, preparation for women cosmetics, shaving and after-shave items, deodorants, washing powder detergent and granite and marble. All these items have been put in the 18 per cent category.”
Almost 227 items were there in 28% GST slab, now only 50 remain, which are mostly luxury items, rest have been put in 18%: Sushil Kumar Modi, Bihar Dy CM #GSTCouncilMeet pic.twitter.com/bjds4iVEJT
— ANI (@ANI) November 10, 2017
178 items removed from 28% slab to 18 % in GST. Only 50 demerit & luxury items now in 28% slab @SushilModi https://t.co/OyRewp7jID
— anshuman tiwari (@anshuman1tiwari) November 10, 2017
Additionally, tax rates on fire extinguishers, watches, blades, stoves, mattresses too have been brought down, from 28 per cent to 18 per cent. However, luxury or demerit goods such as tobacco, washing machines, air conditioners, and items such as paint, cement, etc will continue to be taxed under the 28 per cent tax slab.
Furthermore, finance secretary Hasmukh Adhia has made the following points on the miscellaneous outcomes of the GST Council meet:
a) All taxpayers would file only GSTR-1 in the current year, FY 2017-18.
b) Filing of GSTR 3B for all taxpayers would continue till March 2018.
c) About 30-40 per cent of returns filed were “nil”, and GST Council has made it “easier” for those filing nil returns.
d) GSTR1, GSTR2 and GSTR3 forms would be given “another look”.
Filing of return for 3B will be continued till March. All tax payers will continue to file 3B till March 2018: Hasmukh Adhia, Finance & Revenue Secretary after 23rd #GSTCouncilMeet pic.twitter.com/bc1dPzWktG
— ANI (@ANI) November 10, 2017
If there is a nil return to be filed then late filing penalty will be reduced to Rs 20. For others it has been reduced to Rs 50.: Hasmukh Adhia, Finance & Revenue Secretary after 23rd #GSTCouncilMeet pic.twitter.com/FX9jJxbiIi
— ANI (@ANI) November 10, 2017
Another important change was taxing all restaurants at 5 per cent GST, and no input tax credit (ITC) benefit to be given to any restaurant, while taxing starred hotels charging rooms above Rs 7,500 a night at 18 per cent.
All restaurants in the country to be levied GST of 5%, no ITC benefit to any restaurant: FM Arun Jaitley after 23rd #GSTCouncilMeet pic.twitter.com/EBviOSJhlb
— ANI (@ANI) November 10, 2017
Congress wants 18 per cent cap
However, Opposition led by Congress, much like its original suggestion on the GST, is demanding a complete overhaul of the indirect tax regime, with the cap at 18 per cent, and not 28 per cent.
While Congress vice-president Rahul Gandhi, high on his spunky metaphors and catchphrases, has asked the “Gabbar Singh Tax” to be changed into a “Genuine Simple Tax”, former Union finance minister P Chidambaram has said that his party is pushing for capping GST at 18 per cent, thus helping manufacturers and retailers alike, while bringing the small and medium entrepreneurs out of their GST-induced misery.
Congress has also alleged that the GST review was done keeping in mind the upcoming Gujarat elections.
We will not allow BJP to impose a Gabbar Singh Tax on India. They cannot break the back of the small and medium businesses, crush the informal sector and destroy millions of jobs. #GSTCouncilMeet
— Office of RG (@OfficeOfRG) November 10, 2017
Some Suggestions1. Correct the fundamental flaw in GST architecture to give India a Genuine Simple Tax. 2. Don’t waste India’s time with lip service.3. Acknowledge your incompetence, shed your arrogance and listen to the people of India.
— Office of RG (@OfficeOfRG) November 10, 2017
Congress FMs will force changes in GST Council meeting today. Agra, Surat, Tiruppur and other hub towns are watching.
— P. Chidambaram (@PChidambaram_IN) November 10, 2017
While Congress-ruled states have written to Union finance minister Arun Jaitley to cap GST at 18 per cent, even BJP’s Sushil Modi has indicated that “consensus” seems to be building towards that end, but pegging it on public feedback and not mounting Opposition pressure. "The key agenda to be taken up is revamp of the 28 per cent slab and the composition scheme for businesses as well as restaurants. Most of the issues will be addressed," Sushil Modi said.
The question of inclusion of petroleum, currently excluded, in the GST also divided the parties, with Congress in favour of it, but Kerala finance minister CPI(M)’s Thomas Issac saying that adding petroleum and real estate into GST mustn’t be hurried into until the tax regime settles down.
Revenue loss over messy GST
West Bengal finance minister, Amit Mitra, who was the chairman of the Empowered Committee of state FMs on GST, has said there has been a staggering loss of revenue because of the messy GST structure, with too many slabs and different kinds of GST for the Centre, states, and in between. Mitra put the figure at Rs 60,000 crore for Centre and Rs 30,000 crore for the states in the last three months since GST was rolled out on July 1 this year.
As red-flagged by India Today Hindi editor Anshuman Tiwari, the “selective fixing” by the GST Council, shifting the 178 items from 28 per cent to 18 per cent tax slab, is one of the quick fixes that have been witnessed multiple times in the recent past. Tiwari has asserted that GST Council meets are becoming “mini budget affairs” of “re-fitment” and not reform, which fly in the face of established global practice of stable and long-term institution of the indirect tax regime.
Again ‘Selective fixing’-178 items removed from 28% slab to 18 % in #GST. https://t.co/TdOt8iHR6J
— anshuman tiwari (@anshuman1tiwari) November 10, 2017
With frequent changes in the tax rates now becoming the norm, consumers and the industry are at a loss and this has hit compliance in a big way, resulting in the revenue losses as claimed by Amit Mitra. There’s no tax discipline, and political pressure as well as terribly flawed, frequently-changed tax slabs have created a flurry of confusion and weariness in the economy and market, as Tiwari has pointed out.
Shocking And they expect #GST to be a success!Via @TOIIndiaNews pic.twitter.com/0zzJjlaneV
— Anil Padmanabhan (@capitalcalculus) November 9, 2017
With 18 per cent cap on GST now a distinct possibility, most are bracing for more imminent changes, possibly in the next few GST Council meets. Though the current palliative of slashing the tax rate for 178 items will help many, this really is an inadequate cure for an ailing economy in search of certainty and stability from the lawmakers of the country.