The GST council in its 47th meeting in Chandigarh on Wednesday decided to bring new items under the tax ambit and raise cess on few goods and services. GST rates are being revised to rationalise tax on certain goods and services to correct an inverted duty structure, said Finance Minister Nirmala Sitharaman who chairs the council.
Tarun Bajaj, the revenue secretary said that exemptions and correction of inversions will come into effect from 18 July. According to Sitharaman, the GST council accepted most of the recommendations made by a group of ministers from different states to withdraw exemptions in order to rationalise taxes.
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What is GST?
The Goods and Services Tax is a uniform indirect tax that has replaced central taxes like central excise, service tax, additional duties of excise and customs and special additional duties of customs. Similarly at the state level, GST subsumes taxes like sales value added tax or sales tax, entertainment tax, octroi and entry tax, purchase tax, luxury tax and taxes on lottery, betting and gambling.
GST was introduced in 2016 after both houses of the parliament passed the Constitutional (122nd Amendment) Bill in the hope of bringing the whole nation under one common market.
There are two components of GST- Central GST (CGST) and State GST (SGST). While CGST is levied on intrastate supplies by the central government, SGST is levied on intrastate supplies by state governments.
What is the GST council?
The GST council was set up by the President of India in 2016. A joint forum of centre and states, the council includes Union Finance Minister, who acts as the chairperson and Union Minister of State (Finance) from the central government. It also includes minister-in charge of finance or taxation from each state or any other minister that a state nominates.
According to a report on Indian Express, the GST council was set up to make recommendations to the centre and states on important issues related to GST. It also has the power to revise tax slabs on various goods and services.
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What is an inverted duty structure?
An inverted duty structure occurs when taxes on final products are lower than the taxes charged on inputs. In such cases, the GST rate paid at the time of a purchase is more than the GST rate payable on sales, according to a Moneycontrol report. The government has to refund most of the accumulated inverse input tax credit. In order to rectify this, the government is prompted to look at and revise current duty structure.
Items that will get expensive after GST revision
- Packaged and unpacked food items like rice, wheat will now attract five per cent GST
- Hotel rooms that cost under Rs 1,000 per day, which are not taxed presently, will now be brought under the 12 per cent tax slab
- Non-ICU hospital rooms under Rs 5,000 per day, that is currently exempted from GST tax, will now be charged with a five per cent tax
- An 18 per cent tax will be levied on fee charged by banks upon the issuance of cheque books
- Knives, blades, spoons, forks, ladles and the like have been placed under the 18 per cent tax slab, which has been increased from a previous 12 per cent
- Hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes, will attract 18 per cent GST
- Postal services will also be taxed under the GST regime. However, postcards and inland letters, book posts, and envelopes weighing less than 10 gm won’t be taxed
- The cost of LED lights and lamps, fixtures and their circuit boards will now attract 18 per cent GST, compared to the 12 per cent earlier
- Machines for cleaning, sorting, or grading seeds and grain pulses and also air-based atta chakki, and wet grinders will now attract 18 per cent GST as opposed to the current 5 per cent
Items that will get cheaper after GST revision
- The Council has slashed the tax rates on transport of goods and passengers via ropeways from 18 per cent to five per cent
- Upon the consideration of fuel prices, GST tax on goods carriage rental have been reduced from 18 to 12 per cent
- Orthopaedic appliances like splints and artificial body parts will now attract five per cent GST as opposed to 12 per cent
- IGST on specified defence items imported by private entities/vendors, when end-user is the defence forces have been exempted
When was the last time GST was revised?
The 46th GST council meeting was held in 2021, wherein recommendations were made to merge the 12 and 18 per cent tax slabs. Besides this, the Fitment committee that comprises of tax officers from both the Centre and states had made “sweeping” recommendations to the Group of Ministers (GoM) regarding rate changes and taking out items from the tax exemption list.
With inputs from agencies
