GST Council cuts rates on 23 items including TVs, no relief on cement

Arun Jaitley
The Goods and Services Tax (GST) Council on Saturday cut tax rates on 17 goods and six services, ranging from cinema tickets, televisions, digital cameras and Jan Dhan accounts to frozen vegetables, a move that will cost the Union and state governments about Rs 55 billion in one year and Rs 13.75 billion in the remaining three months of the current financial year. 

The Council pruned the list of items under the peak 28 per cent slab by removing six goods, leaving only 28 now, Finance Minister Arun Jaitley said. Among items that saw rate cuts from 28 per cent to 18 per cent include pulleys, transmission shafts, cranks and gear boxes from the agriculture sector. Jaitley said there was a consensus that sin and luxury goods should continue to attract a 28 per cent tax. 

The 34 items in the 28 per cent slab contributed about 25 per cent to GST revenues. “Therefore, it was impractical to abolish the 28 per cent GST rate,” Kerala Finance Minister Thomas Isaac said. 

The Council refrained from slashing tax on cement and automobile parts as this would have revenue implications of Rs 330 billion in a year, Jaitley said. While a rate cut on cement would hit the exchequer by Rs 130 billion, auto parts would have bearing of Rs 200 billion of revenues. “All materials for the construction and housing sector, except cement, are now taxed at 18 per cent or below. Lowering it for cement is the target, but not until the impact of its revenues becomes affordable,” he said.

Cement players hoped that the duty rationalisation on cement would be considered in the next meeting. 

Mahendra Singh, president, Cement Manufacturers Association, and MD & CEO, Dalmia Cement Bharat, said, “A rationalised GST rate would definitely result into higher number of houses, more km of roads and better infrastructure at the same cost.”

Earlier, Prime Minister Narendra Modi had said that only up to 1 per cent of the items would be left in the peak rate of 28 per cent. 

Taking a dig at the Prime Minister, West Bengal Finance Minister Amit Mitra said, “The important man had said about scrapping 28 per cent rate. This is not so. Cement, air conditioners, dish washers, sin goods such as tobacco and luxury goods will remain there,” he said. 

To provide relief to the real estate, various proposals were discussed to address the issue of anomaly between the houses which are being constructed and constructed ones. 

Currently, the houses which are being constructed attract a 12 per cent GST. However, constructed houses are outside the GST regime and attract the stamp duty only. 

“Various proposals have come in this respect. The fitment committee will give its views and this will be taken up at the next council meeting,” Jaitley said. The Council discussed the issue of balancing the GST rationalisation with revenues. It was stated that the states were given compensation cess of Rs 480 billion in the eight months of the GST regime in 2017-18. 

Taking on a pro-rata basis, it should have been Rs 720 billion. But, the compensation cess given to states in the first six months of the current financial year was Rs 300 billion, which would mean Rs 600 billion in the year on a pro rata basis. This was due to improved collections from the GST, Jaitley said. 

He said GST collections had improved in most states, including consuming states of the northeast and manufacturing states of Maharashtra and West Bengal. 

Average GST collections per month stood at Rs 890 billion last year, while it’s Rs 960 billion this year so far. “However, it should be remembered that GST rates were cut on hundreds of items,” Jaitley said. There are some states which have not seen improvement in collections. A group of ministers will study the data available in this regard with the help of the National Institute of Public Finance and Policy. 

When asked about dwindling revenues compared to the target, Jaitley told Business Standard, “There are worries but revenues are sliding up. If you remember, there was a similar criticism after the introduction of VAT but the revenue was neutralised within three years.” Abhishek Rastogi, partner, Khaitan & Co, said, “The meeting effectively maintained a balance between the revenue deficit and rate rationalisation.”

Pratik Jain, partner at PwC, said the 28 per cent rate on most items had been reduced, which simplified the tax structure and would also boost the consumption.

Abhishek Jain, partner at EY, said, “While consumers would look forward to a reduction in prices, companies including their dealers and distributors would need to ensure compliance with anti-profiteering provisions for such rate reductions.”

The Council gave in-principle approval to the creation of a centralised advance authority if there are conflicting orders given by the AARs. However, if there are no conflicting orders, then these rulings would be final.

A proposal was also taken up to address the issue of anomalies in lotteries. Currently, state-organised lotteries draw a 12 per cent GST, while state-authorised lotteries attract 28 per cent. “The issue will be considered after taking views of the states,” Jaitley said. 

The Council will take up the matter of the calamity cess proposed by the Kerala finance minister in the next council meeting as the group of ministers are in the process of finalising a report.

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