GST: Marathon ends, sprint begins for July 1 roll-out

Tax rates sealed for almost all items; gold to attract 3%, biscuits 18%

The Goods and Services Tax (GST) Council on Saturday fixed the rates for almost all the remaining items, such as precious metals (gold and silver), diamonds, biscuits, textiles, and footwear. 

Now, the new indirect tax regime is most likely to be rolled out on July 1, despite reservations voiced by West Bengal. All other states have agreed to the timeline.

The rates of all the other goods were fixed in the previous meeting of the Council, chaired by Union Finance Minister Arun Jaitley, in Srinagar in May.

The Council also cleared confusion over the rates previously fixed, besides raising refund on input taxes paid on some stocks in transition for which dealers did not have receipts. Even those under the current excise tax exemption limit, with an annual turnover of up to Rs 1.5 crore, would get input tax credit.

After receiving feedback on the rates from industry, the Council would meet again on June 11 to review these.

Jaitley, on Saturday, said he was hopeful about the July 1 roll-out. He said the GST Network (GSTN), the information technology backbone of the new tax regime, had responded satisfactorily to various questions from state finance ministers.

Asked about West Bengal Finance Minister Amit Mitra’s concerns over the GSTN’s preparedness, Jaitley said, “Others did not share these views.”

 While deciding on the GST rate, the Council made a distinction between different kinds of footwear, depending on their prices. Those priced below Rs 500 could be taxed at 5 per cent. More expensive footwear would be taxed at 18 per cent.

After the meeting, Jaitley told reporters that currently shoes priced up to Rs 500 were taxed at Rs 9.5 per cent, between Rs 500 and Rs 1,000 at 23 per cent and those priced above Rs 1,000 were taxed at 29.8 per cent. 

Textiles and clothes would also attract different rates, again depending on prices.

Ready-made apparel priced below Rs 1,000 would attract GST at 5 per cent. More expensive clothes would be taxed at 12 per cent.

All categories of yarn, except man-made, will be taxed at 5 per cent, man-made yarn at 18 per cent, and cotton fibres at 5 per cent. There will be no tax on silk and jute.

Deciding on the GST rate for gold was tricky, said Jaitley. Some wanted it taxed at 2 per cent, while others at 5 per cent. The Council reached consensus to tax the precious metal at 3 per cent.

Gems, jewellery, diamond and silver would also attract the same rate. However, uncut diamonds would attract a notional tax of 0.25 per cent, said Jaitley.

“The decision to create a new category for gold, silver and diamonds indicates the government has maintained parity with existing rates,” said M S Mani, senior director, Deloitte. “However, this might open the door for makers and sellers of other products to request special rates.”

The GST has five slabs — 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent.

Taxing biscuits was also a bit complicated, as there were proposals to have two rates. The Council, however, decided on a single rate of 18 per cent.

“The sector had expected different tax rates for cheaper and more expensive products but finds itself with a uniform rate,” said Pratik Jain, leader, indirect tax, PwC.

Jain added the government seemed to have tried to keep rates under the GST near the current ones though there might be some disparity in its calculation and that of industry. “It is important the government takes a look at it in the next meeting.” 

The GST Council on Saturday also discussed the issue of setting up an anti-profiteering body that would look into complaints. It would have revenue officers from the Centre as well as the states.  

Another contentious item for which the Council decided on the GST rate was bidis. While doctors and health workers had advocated the highest rate for it, others had wanted a lower rate as the bidi manufacturing industry employed poor people.

The Council has decided to tax it at 28 per cent, albeit without a cess. Tendu leaves, used to make bidis, will be taxed at 18 per cent.

Solar panels, which currently attract a tax rate of 12 per cent, would have a levy of 5 per cent under the GST regime. Packaged food would be taxed at 5 per cent. Currently these attract a rate of 23-24 per cent, depending on the value-added tax (VAT) imposed by the state where the goods were being sold.

The Council also decided to give back 50 per cent of the tax imposed on defence canteens, Jaitley said. Excise duty, as under the current regime, will be imposed but not VAT, he added.

In the Srinagar meeting, it was decided to give 40 per cent refund to stock in transition for which dealers had no receipt. Industry had demanded to raise it. The Council decided it would be 60 per cent for those items attracting a GST of 18 or 28 per cent.

“For goods attracting a lower tax, refunds — technically known as input tax credit — would be at 40 per cent,” Revenue Secretary Hasmukh Adhia. 

Those who do not have receipts of high-value items (Rs 25,000 and more) would be given full refund if they can produce other proof of buying these goods. The government will come out with guidelines on this. 

The Council also cleared confusion over rates of some items.

For instance, there was no clarity on rate of tax sports items would attract. Sources said it had been clarified that gym items would attract a tax of 28 per cent; the remaining at 12 per cent.

Geometry boxes would attract GST at 12 per cent. Edible oil and mixed oil would both be taxed at 5 per cent.