GST Council meet: Rate rejig for 30 items, small cars escape cess net

Mid-sized and large luxury cars as well SUVs will now cost more

Mid-sized and large luxury cars as well as sports utility vehicles will now cost more, as the Goods and Services Tax (GST) Council has raised cess on them. Small cars and hybrid vehicles and those with a capacity of up to 13 passengers have, however, been exempted from the hike.

There was some relief, though. The cess was not raised to the peak rate of 25 per cent nor to the pre-GST rate. 

The Council also decided to extend the deadline for filing supply returns by one month — to October 10. State finance ministers and industry players had claimed that the GST Network was unable to cope up with the load of returns. Filing of summarised and self-certified returns, GSTR-3B, will also be allowed till December, Union Finance Minister Arun Jaitley said after the meeting.

A three-member committee has also been set up to examine issues related to the GSTN. The composition of the committee would soon be decided, said the FM, who is also chairman of the Council.

In its second meeting since the roll-out of the GST on July 1, the Council also removed an anomaly on taxing processed food. Now, all processed food manufacturers who had a registered trademark till March 15 will have to pay 5 per cent GST, even if they de-registered later. Similarly, all exclusive labels would come under the 5 per cent tax slab, even if these are not registered under the trademark rules.

Business Standard reported on Thursday the Council was going to take this step.

The Council also cut rates on around 30 items of mass consumption such as batter for idli, dosa, incense sticks, plastic raincoats, and rubber band, Jaitley said. It also lowered rates on some categories of handicrafts. Also, khadi fabric sold from the Khadi Village and Industries Corporation has been exempted from the GST. 

A composition scheme, which allows those up to Rs 75 lakh of turnnover a year to opt for flat rate of GST, has been extended till September 30. 

On the auto sector, Jaitley said even after the increase in cess, there was a tax advantage of 11 percentage points on SUVs. These now attract a GST rate of 50 per cent (28 per cent tax and 22 per cent cess)

Similarly, large luxury cars had a tax advantage of eight percentage points, he said. The total tax incidence on these will now be 48 per cent (28 per cent tax, 20 per cent cess).

Mid-sized cars had a tax advantage of 5 per cent, said FM. These vehicles shall now attract a tax incidence of 45 per cent.

Asked why cars were still being given a tax advantage, Jaitley said, “We have to link it to our revenue consideration, besides giving a boost to manufacturing.”

Carmakers were, naturally, not too happy with the hike in cess, and claimed it would affect their sales.

“The Council has basically restored pre-GST relative excise duty differentials between the various categories of vehicles. Whatever is the impact of the increased cess will reflect in the revised pricing from the effective date,” said Pawan Goenka, managing director, M&M.

The taxes… were already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalisation of taxes... Prices will go up again, which is disappointing,” said Rahil Ansari, head, Audi India. 

Welcoming the revisions, experts said more might come in the future.

M S Mani of Deloitte said, “While the rate changes made are welcome, too many changes in rates after the introduction of the GST indicates that the rates finalised earlier had not considered all the relevant weighted averages across states and across specific product categories. We can expect more changes in the future.”

The GST Council also corrected an anomaly about taxes on packaged goods. Since a 5 per cent GST was imposed on packaged goods, many makers had started deregistering their brands, as unbranded ones were untaxed.

On Saturday, the Council decided the tax rate would be levied on all brands that were registered till March 15 this year, as well as brands claimed to be exclusive by companies.

Jaitley also said GST had delivered Rs 95,000 crore revenue in July, even as only 75 per cent of assessees had filed returns. 

There was some relief for assesses, who can now file supply returns — GSTR 1 — till October 10, if their revenues are up to Rs 100 crore. Those with more revenue will have to file returns by October 3. The original deadline for filing this return was September 5, and it was extended to September 10.

Input returns (GSTR-2) can now be filed till October 20, input-output returns (GSTR-3) till October 31.

Jaitley said the GSTN system was under pressure on Thursday because of filing by banks, as they had to file returns branch wise. 

Industry players were happy with the extension.

Abhishek Rastogi, partner, Khaitan & Co, said, “The extension was essential, as there were a lot of technical and systems issues.”

Deloitte’s Mani said it was expected various backend changes required to ease the return-filing process would also be completed by the GSTN in the interim as the challenges in submitting the return may not be on account of increased return traffic alone.