From income tax to GST, seven changes from April 1

Taxpayers with income of up to  ₹5 lakh during the financial year are eligible for full tax rebate for the new financial year. (Mint)

With the start of the new financial year 2019-20 from today, a slew of changes that can affect your financial planning as a few changes related to income tax and GST come into effect from April 1. As announced in the interim budget 2019, all changes relating to income tax come into effect from today. For those planning to buy a new flat, the goods and services tax (GST) rates on all under-construction flats have been reduced from today. Here are five such changes that came into effect from today.


Taxpayers with income of up to 5 lakh during the financial year are now eligible for full tax rebate. However, the tax slab will remain the same as the last financial year but those earning up to 5 lakh will not have to pay any tax.


You will not have to pay any income tax on notional income from second house. In case the taxpayer has more than two properties which are self-occupied, then notional rent would need to be computed on the third and additional properties and offered to tax.


Benefiting small tax payers, the TDS threshold has also been increased from today. For interest income earned through bank and post office deposits, tax deducted at source (TDS) will be 40,000 against 10,000. Similarly, the TDS threshold for deduction of tax on rent will be 2.40 lakh from 1.80 lakh last year.


Leading to extra tax savings, the limit for standard deduction has been increased to 50,000 from 40,000 for the new financial year. The increase of standard deduction limit by10,000 will lead to tax savings of 3,120 for individuals in the highest tax bracket of 31.2%, excluding surcharge.


With effect from April 1, the GST Council has slashed tax rates for under-construction flats in an affordable category to 1%. GST rate on other categories has been reduced to 5% from the earlier 12%.


The finance ministry has extended long-term capital gains exemption on selling of two residential houses provided the long-term capital gain is up to 2 crore. This is a one-time opportunity to claim such exemption.


From today, you will not be sell shares unless you hold them in dematerialised form. According to Sebi instructions, it is now mandatory to hold shares in demat form if you want to sell it.


Natural gas, jet fuel may come under GST ambit, which companies will benefit?

With the Goods & Services Tax completing 1 year since its rollout, the GST Council is now considering bringing natural gas and aviation turbine fuel (ATF) under the tax ambit on an experimental basis.

The inclusion could bring a cheer to gas and aviation companies and sectors that use gas as an input. While the inclusion of gas seems feasible given the current taxation rates, GST on ATF would be something to watch out for as the current taxation rate on the same is higher than the highest GST slab (28 percent) in some states.

Current scenario

Natural gas along with crude oil, petrol, diesel, ATF was kept out of the GST regime given the complexity in taxation and disagreements among states due to the loss of revenue on account of the shift from the current Value Added Tax regime. With the new tax regime now stabilising and to provide some relief to gas and airline companies, the council is now considering its inclusion.

At present, natural gas, excluding liquefied petroleum gas, is taxed according to the old taxation regime (VAT and excise duty ranging from 5 percent to 26 percent, which varies from state-to-state). LPG is taxed at 5 percent under GST. Up to 40 percent tax is charged on ATF, which varies from state to state.

Why the shift to GST?

Non-inclusion of natural gas and ATF under GST has impacted profits and volumes for companies in the sector and industry as a whole. Expenditure for downstream gas companies and airlines has increased due to the non-availability of input tax credit. Absence of the latter to end users has hurt margins as well as sales volumes. It has also led to dual compliance pressures and increased costs due to multiple tax systems. Overall, there has been a noticeable impact on margin which has left medium and small enterprises at a disadvantage.

The revenue angle

Unlike oil, tax rates on gas products falls close to the GST tax slabs. Given the limited compromise on revenue for the exchequer, inclusion of gas products under GST is only logical. It is a win-win for both gas companies as well as firms using gas as a raw material. Improved volume offtake and reduced costs would be key benefits for major gas companies. Availability of input tax credit would make liquefied natural gas an attractive alternate fuel option and attract increased offtake from the industrial and commercial users who would be then able to claim credit for input taxes paid. It will also help the government in its push for cleaner fuels.

GST on jet fuel would be a decision worth watching as the rate of taxation is above the highest GST slab of 28 percent, though it varies from state to state. Airlines currently pay VAT or state sales tax that ranges from 4-30 percent and excise duty of 14 percent. There is a possibility that the government might tweak the rate with imposition of a certain additional cess to cover up for the shortfall in tax revenue. As per representation made by airline companies to the Oil Ministry, the overall impact of a standard tax rate across states would improve tax collections on jet fuel by almost 7 percent.


Apart from higher volumes, GAIL (India) stands to benefit from input tax claims on taxes paid for gas purchased as a raw material for its various verticals. This saving would help push up earnings and provide valuation comfort.

Increased demand from Petronet LNG’s industrial consumers would help protect plant utilisation levels, given the upcoming competition from the Mundra terminal.

The other beneficiaries would be city gas distribution companies, which would gain from reduced costs and uptick in volumes. Even after an 18-28 percent GST rate, compressed natural gas would remain cheaper than alternate fuel options. Moreover, availability of input tax credit would enhance industrial volumes and margins.

Airline companies can expect an annual relief of Rs 3,000-5,000 crore under input tax credit if the same is included in GST.

Standardised rate would also mean freedom of procurement from across the country and would help companies save on logistic costs. Overall, we see the proposal as a move towards fuller implementation of GST and would bring in positive returns for both companies and the government.


States will get to levy additional taxes on top of 28% GST on petrol, diesel: Sushil Modi

“If petro products are brought under GST, then there will be minor impact on the incidence of tax... and minor impact on prices. The price of petrol, diesel will continue to be driven by global factors,” Modi said.

Petrol and diesel, when brought under GST, will involve a peak tax rate of 28%, with additional levy by states, which would keep retail rates at almost the same level as they are currently, deputy chief minister of Bihar, Sushil Kumar Modi said on Friday.

Modi, however, said it will take some time for states to get around to including petrol and diesel in the GST and the Council will take a final call on the timing.

“If petrol, diesel are to be brought into GST, then states will be allowed the levy taxes on top of 28% to prop up revenue. It will take some time to include petrol, diesel in GST as the states have divergent views,” Modi said at a PHD Chamber event in New Delhi.

“If petro products are brought under GST, then there will be minor impact on the incidence of tax… and minor impact on prices. The price of petrol, diesel will continue to be driven by global factors,” Modi said.

He said 45-50% of tax revenues of states come from petrol and diesel.

Modi also said that petrol and diesel would not be included in GST in the coming few months, and the focus will instead be on the new return filing system.

The peak GST rate plus VAT will be equal to the present tax incidence, which is made up of excise duty, levied by the central government, and VAT charged by the states.

The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy Value Added Tax (VAT) – the lowest being in Andaman and Nicobar Islands where a 6% sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12% on petrol while Telangana levies the highest VAT of 26% on diesel. Delhi charges a VAT of 27% on petrol and 17.24% on diesell.

The total tax incidence on petrol comes to 45-50% and on diesel, it is 35-40%.

Under GST, the total incidence of taxation on a particular goods or a service has been kept at the same level as the sum total of central and state levies existing pre-July 1, 2017. This was done by fitting them into one of the four GST tax slabs of 5, 12, 18 and 28%.

For petrol and diesel, the total incidence of present taxation is already beyond the peak rate and if the tax rate was to be kept at just 28% it would result in a big loss of revenue to both centre and states.

After hitting an all-time high of Rs 78.43 a litre for petrol and Rs 69.31 for diesel on May 29, rates have fallen during the subsequent days on softening in international oil prices. Petrol costs Rs 75.55 a litre and diesel Rs 67.38 in Delhi on Friday.

The central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

This led to its excise collections from petro goods more than doubling in last four years – from Rs 99,184 crore in 2014-15 to Rs 229,019 crore in 2017-18. States saw their VAT revenue from petro goods rise from Rs 137,157 crore in 2014-15 to Rs 184,091 crore in 2017-18.

GST subsumed more than a dozen central and state levies like excise duty, service tax and VAT when it was implemented from July 1, 2017.

However, its implementation on five petro products – petrol, diesel, natural gas, crude oil and ATF was deferred. This resulted in the industry losing on revenue as they were not able to offset GST tax they paid on input from those paid on the sale of products like petrol, diesel and ATF.




Government Collects Rs. 7.41 Lakh Crore From GST In FY18, Says Finance Ministry

Government Collects Rs 7.41 Lakh Crore From GST In FY18, Says Finance Ministry

New Delhi: The government mobilised Rs. 7.41 lakh crore from the Goods and Services Tax (GST) during 2017-18, according to the finance ministry. The government rolled out the GST regime from July 1 last year. “During the year 2017-18, total revenue collections under GST in the period between August 2017 and March 2018 has been Rs. 7.19 lakh crore. Including the collection of July, 2017, the total GST collections during the 2017-18 stands provisionally at Rs. 7.41 lakh crore,” the Finance Ministry said in a tweet.

“This includes Rs. 1.19 lakh crore of CGST, Rs.1.72 lakh crore of SGST, and Rs. 3.66 lakh crore of IGST (including Rs. 1.73 lakh crore on imports) and Rs. 62,021 crore of cess (including Rs. 5,702 crore on imports),” it said.

The average monthly collection has been Rs. 89,885 crore during the August-March period, it said.

Total compensation released to the states for a period of eight months during 2017-18 was Rs. 41,147 crore to ensure that the revenue of the states is protected at the level of 14 per cent over the base year tax collection in 2015-16.

The Revenue Gap of each state is coming down over the last eight months, it said, adding the Average Revenue Gap of all the states for the last year is around 17 per cent.




From Income Tax Rules To New GST E-Way Bill; Changes That Came Into Effect From April 1

From Income Tax Rules To New GST E-Way Bill; Changes That Came Into Effect From April 1

The new income tax (I-T) rules came in force from April 1.

There are some major announcements and financial changes that came into effect from April 1, 2018, the first day of financial year, 2018-19. These includes proposals announced in the Budget 2018 by the Union Finance Minister Arun Jaitley for this financial year, introduction of e-way (electronic way) bill system under GST (Goods and Services Tax) for inter-state movement of goods and State Bank of India’s new charges for non-maintenance of minimum balance. The new income tax (I-T) rules are came in force from Sunday.

New income tax rules

New tax provisions implemented April 1 onwards. However, there is no change in the income tax slab for the individual tax payers but changes are made as far as quantum of deductions, cess and corporate tax rate are concerned. The Budget 2018 proposals including the reintroduction of the tax on long-term capital gains (LTCG) exceeding Rs.100,000 from the sale of shares kicked off from April 1. Besides, other tax proposals like reduced corporate tax of 25 per cent on businesses on turnover of up to Rs. 250 crore and a standard deduction of Rs. 40,000 in lieu of transport allowance and medical reimbursement came into effect from Sunday. (Read more)

GST e-way bill for inter-state movement of goods

The e-way (electronic way) bill system under GST (Goods and Services Tax) for inter-state movement of goods became effective from April 1, the government said. The e-way bill applies to inter-state transportation of goods worth over Rs. 50,000 through road, railways, airways and vessels. For the smaller value consignments, no e-way bill is mandated, said Finance Ministry. According to the report, a single e-way bill applies even in cases of a break in journey to destination and where more than one transporter is involved in the transportation of goods under this system. (Read more)

State Bank of India (SBI) reduces penalties for non-maintenance of minimum balance

State Bank of India (SBI) has reduced its penalties for non-maintenance of average monthly balance (AMB) on savings accounts by up to 75 per cent. The charges for non-maintenance of AMB for customers in metro and urban centres are reduced from a maximum of Rs. 50 per month plus goods and services tax (GST), to Rs. 15 per month plus GST from April 1, said country’s largest lender. For semi-urban and rural centres, the charges are reduced from Rs. 40 per month plus GST to Rs. 12 per month and Rs. 10 per month plus GST respectively from April 1, said SBI. (Read more)


Over 68,000 companies registered since GST rollout: Corporate affairs minister

GST, the country’s biggest tax overhaul in recent times, was rolled out in July last year.

More than 68,000 companies have been registered in eight months following the implementation of the Goods and Services Tax (GST) regime, Union Minister PP Chaudhary said on Friday.

GST, the country’s biggest tax overhaul in recent times, was rolled out in July last year.

“The total number of companies registered during the period July 2017 to February 2018 period is 68,299,” the minister of state for corporate affairs said in a written reply to the Lok Sabha.

“The number of such registrations was 63,106 between July 2016 and February 2017. Thus, an increasing trend in the number of company registrations has been maintained post-GST, the minister added.

In a separate reply, Chaudhary said that over 17 lakh companies had been registered in India till last year, out of which only 7,270 entities were active.

“There were only 7,270 active listed companies out of 17.21 lakh registered companies as on December 2017 whereas in December 2014 there were 7,261 active listed companies out of 14.39 lakh registered companies in India,” he added.

Chaudhary also said names of over 2.26 lakh companies have been struck off from the Registrar of Companies for failing to comply with regulatory requirements as on December 2017, with Maharashtra accounting for most of these firms.

Out of the total deregistered firms, as many as 59,849 companies are from Maharashtra, followed by Delhi (43,925), Tamil Nadu (24,723), Karnataka (18,165), Telangana (16,817) and Gujarat (11,389).

The minister, in a separate reply, said that as many as 48,886 prosecutions against the firms for violation of Companies Act, were pending as on January 2017 with the various courts.

In 2016-17 (till November 2017), 4,775 fresh prosecution cases were filed. Thus, out of total 51,661 cases, a total of 4,703 prosecutions were disposed of and 46,958 prosecutions were pending.




GST Council cuts tax rates on 29 items, discusses simpler return-filing process

Union finance minister Arun Jaitley addresses media after the GST Council Meeting in New Delhi on Thursday.

The Goods and Services Tax Council (GST Council) on Thursday cut tax rates on 29 products and 54 services at its 25th meeting and agreed to make the process of filing tax returns simpler.

At the meeting chaired by finance minister Arun Jaitley, the federal indirect tax body cut rates on products including pre-owned vehicles, household cooking gas cylinders from private suppliers and precious stones.

Services that will be taxed less include legal assistance provided to the government and its agencies, admission to theme parks and small housekeeping services provided by e-commerce firms such as UrbanClap. The revenue impact of these rate cuts will be to the tune of Rs1,100-1,200 crore.

The move to simplify the process of tax return filing comes amid revenue loss worries expressed by states, largely due to tax evasion. Easing the process could curb evasion.

Though a final decision is yet to be taken on the revamp of the return filing process, the GST Council is thinking of doing away with forms such as GSTR 2, dealing with purchases, and GSTR 3, a comprehensive return. Instead, the existing simpler summary return form GSTR 3B will continue, which will be supplemented with details from invoices to be uploaded by suppliers on the GST Network (GSTN). This will enable invoice matching and check tax evasion.

“Initially there will be GSTR 3B return and then suppliers’ invoices, which will be adequate. This will be a simple process,” Jaitley said.

He added that the Council thought that Infosys Ltd chairman Nandan Nilekani and the two committees under Bihar deputy chief minister Sushil Modi and GSTN chairman A.B. Pandey could finalize the proposals and circulate them among states for approval at the next meeting of the Council.

“Today it was discussed but not finally approved. But it is moving in that direction,” Jaitley said.

“If implemented, this may simplify the GST return filing process but at the same time keep any possible revenue evasion in check,” said Abhishek Jain, tax partner, EY.

The composition scheme, a flat tax payment and quarterly return filing scheme for businesses with less than Rs1.5 crore in sales, is also likely to be modified, with the Council giving its in-principle approval to make the scheme more attractive and reduce tax evasion while making the supply chain seamless.

“Revenue collections in composition scheme is a matter of concern,” Jaitley said.

The changes will enable large registered dealers to purchase from small composition scheme dealers and still avail of input tax credit, said a person familiar with the development.

Under the composition scheme, traders, manufacturers and restaurants can pay tax at 1%, 2% and 5%, respectively, in the new indirect tax regime. Businesses opting for the composition scheme also face a less onerous compliance burden as they have to file returns only once in a quarter as against monthly returns to be filed by other businesses

According to the framework discussed in the Council, large registered dealers can pay tax equivalent to the composition rate on purchases made from small unregistered dealers.

This mechanism, also known as reverse charge mechanism, will enable the buyer to avail of input tax credit.

At the same time, the composition dealer will be exempt from paying the tax on the purchases made by the registered dealers.

At present, 1.7 million traders are registered under the composition scheme and paid only Rs307 crore in taxes in the September quarter, reflecting large-scale under-reporting.

At its next meeting, the Council will also discuss inclusion of petroleum and real estate under GST, Jaitley added.

The council also reaffirmed its decision to roll out e-way bills for inter-state movement of goods from 1 February. In addition, 15 states will roll out e-way bills even for intra-state movement of goods from 1 February.

The minister said that revenue collection will pick up with the anti-evasion steps in place.


December quarter earnings likely to show first signs of revival post GST rollout

Analysts are concerned about the impact of rising crude oil and commodity prices that could hurt the margins of consumer companies.

The first signs of a rebound in corporate earnings growth will likely be visible in the December quarter due to the favourable effect of a low base a year ago and higher consumer spending in the festive season, analysts say. The earnings will also indicate whether the disruption caused by the implementation of the goods and services tax (GST) on 1 July has receded.

The 8 November 2016 invalidation of high-value bank notes squeezed consumption in the third quarter of 2016-17, hitting sales and profits of companies.

In the three months ended December 2016, aggregate sales of Sensex companies grew by 3.8%, Ebitda by 7.7% and net profit by 1%. For Nifty companies, sales, Ebitda and net profit grew 4.9%, 9.6% and 10.3%, respectively.

Ebitda—or earnings before interest, taxes, depreciation and amortization—is a measure of operating profitability.

A boost to consumer demand from festivals, including Dussehra in September and Diwali in October, should also help companies post higher sales and profit growth, analysts said. The rupee’s appreciation may, however, hurt the earnings of exporters, and higher commodity prices may take their toll on the margins of packaged consumer goods.

According to Edelweiss Securities Ltd, a recovery in company earnings will gain momentum on the back of the low base effect and the fading impact of GST-related disruptions.

Edelweiss estimates Nifty companies to report revenue, Ebitda (earnings before interest, tax, depreciation and amortisation) and net profit growth of 20%, 12% and 12% year-on-year (YoY), respectively, in the quarter from a year ago, implying 4% earnings per share (EPS) growth in the first nine months of FY18. How much were year-ago figures?.

“While earnings growth is improving, Q4FY18 asking rate (for what, meeting full-year forecasts?) is still high, implying potential downgrade risk. For FY19, Nifty growth is forecast to be 22-25%,” the research firm wrote in a note on 5 January.

Kotak Institutional Equities Research sees net income of BSE Sensex companies growing 15.2% year-on-year (YoY) and 9.2% quarter-on-quarter (QoQ). It estimates EPS of Sensex companies at Rs 1,480 for fiscal year 2018 and Rs 1,825 for fiscal year 2019.

“Metals, non-banking financial companies (NBFC), oil and gas, autos, cement and consumer companies are likely to lead earnings growth in Q3 while telecom, IT (information technology) and pharma sectors may drag in the quarter,” said Gautam Duggad, head of research at Motilal Oswal Institutional Equities.

“We expect 14% and 18% revenue and earnings growth in Q3FY18 for Sensex companies and 15%/22% revenue and earnings growth in FY19,” Duggad added.

Analysts are concerned about the impact of rising crude oil and commodity prices that could hurt the margins of consumer companies. Rupee appreciation could take its toll on export-oriented sectors including information technology and pharmaceuticals. Brent crude prices jumped 16.21%, the rupee gained 2.2% and the Bloomberg commodity index rallied 4.39% in the three months ended December. Elevated bond yields, which will dent treasury income, and higher bad-loan provisions may hurt banks, said Dhiraj Sachdev, vice president & senior fund manager, HSBC Asset Management.

“Earnings growth is likely to be over 20% in FY19 for broader indices. GST fallout on growth in first half will sustain downgrades for FY18 earnings estimated at the beginning of the year. However, this should recede with possible upgrades on cyclical recovery in FY19,” Sachdev added.

Earnings revival is critical for the rich valuations of Indian markets to sustain. Currently, the Nifty is trading at 18.95 times its expected earnings for the current fiscal. Bloomberg data shows Nifty companies’ consensus earnings per share forecast for the current fiscal has fallen 8.5% since April; for fiscal 2018-19, it has been cut by 3.3%.

Though the Indian markets were among the best performers of 2017, with the Sensex gaining how much, high valuations amid continuous earnings downgrades may dam the flow of liquidity which drove equities to record highs last year.

In the first week of 2018, foreign institutional investors bought Indian shares worth a net $7.94 billion and domestic institutional investors, including mutual fund and insurance companies, sold shares worth a net Rs90,834.80




Top 20 stocks which are likely to benefit the most from cut in GST rates

The GST Council slashed rates on 178 items to 18 percent from 28 percent on Friday, which could benefit stocks under consumers, light electrical and home building.

The GST Council slashed taxes on all standalone restaurants to 5 percent, simplified return filing procedures for small firms in one of biggest changes in rules and rates since the new system kicked in from July 1.

The Goods and Services (GST) Council, which met in Guwahati for a 2-day meet starting Thursday of last week, has decided to keep only 50 luxury and ‘sin’ goods like tobacco in the highest slab.

The changes made to the GST Tax slabs will be applicable from 15th November 2017. The reduction in taxes is estimated to have an impact on government revenue to the tune of Rs 20,000 crore.

The government has also ensured that the inflation in the country remains low and the revision of the tax slabs for a host of items can further improve the consumption in the country. We believe that this is a relief to the business community,” Vaibhav Agrawal, Head of Research & ARQ, Angel Broking Pvt Ltd told Moneycontrol.

From the FMCG space companies which are likely to benefit the most are HUL, Emami, Gillette India. In the building material space companies which are likely to benefit the most are Kajaria, Somany Ceramics, Asian Granito, HSIL, Greenply Industries, and Century Plyboards,” he said.

Of the 228 goods that are currently under the highest tax slab, 178 will see a reduction in taxation. These primarily include mass consumption products, leaving only 50 luxury and sin/demerit goods like air conditioners, automobiles paints, cement, washing machines and tobacco, among others, in the 28% slab.

Also Read – Full list of revised GST rates for 178 categories of goods; Tax rate on five-star hotels unchanged

Taxation on selected items in few other tax slabs (18%, 12% and 5%) has been lowered. The GST rate on all restaurants (except in hotels with tariff exceeding Rs7,500/night) has been lowered to 5%, with no input tax credit.

The GST Council decided to impose a uniform GST rate of 5 percent across all categories of standalone restaurants — air-conditioned and non-air-conditioned — but withdraw the benefits of input tax credit (ITC) from such businesses, said a report.

“The 10% point drop from 28% to 18% in certain household and personal care items will certainly benefit companies in these sectors. We believe retail companies like Future Consumer and V2 Retail will be one of the prime beneficiaries along with FMCGs like HUL as they will see rise in turnover for these items,” Dinesh Rohira, Founder & CEO, told Moneycontrol.

“Additionally, even stationary articles including premium paper rates have been slashed hence we think JK Paper and West Coast Paper should gain from this move. As regards sanitary ware items, Cera Sanitaryware should benefit the most in this segment while shaving products maker Gillette India will rejoice too by this move,” he said.

There will be certain companies which might get adversely affected by the move especially cigarette and tobacco makers such as ITC, VST Industries which stand to lose the most.

“Other luxury goods like washing machines and ACs have been retained at 28% GST, hence stocks like Videocon Industries, Voltas, Blue Star stand to lose.

Even Paints and Cement sector stocks like Asian Paints, Nerolac, Ambuja, ACC etc. will get impacted by the move as there was no relief for these in the 28% GST slab,” said Rohira.

Domestic brokerage firm Motilal Oswal has come out with a list of stocks which are likely to benefit the most from the recent GST tweak:

Detergents, shampoo, hair color, chocolate & malt extract, instant coffee, deodorants, shaving cream, razor blades, luggage, footwear, watches, fans, switches, wires & cables, tiles, plywood , condensed milk, aircraft engines, aircraft tyres and aircraft seats amongst others have witnessed a significant reduction in duty.

“We believe that this will benefit companies like HUL, GSK Consumer, Gillette, Nestle, Havells, Crompton Consumer, Finolex Cables, Kajaria Ceramics, Somany Ceramics, Century Ply, Bata, VIP Industries, Interglobe Aviation, and Jet Airways among others,” Motilal Oswal said in a report.


GST Council May Prune List Of Items In 28% Slab

The GST Council may on Friday consider reducing rates for some daily use items (Representational image)

Guwahati: The GST Council may on Friday consider reducing items in the 28 per cent tax slab and slash rates for daily use items, plastic products and hand-made furniture as it looks to provide relief to consumers. Four months after the rollout of Goods and Services Tax (GST), the panel, headed by Finance Minister Arun Jaitley, will look at the most comprehensive overhaul of rates, easing returns filing and providing more relief to small and medium enterprises, official sources said.

The 23rd meeting of the GST Council will also deliberate on the suggestions made by Assam Finance Minister Himanta Biswa Sarma-headed GoM to cut tax rates for the composition scheme businesses to 1 per cent and lower rates for non-AC restaurants.

The GST Council, comprising state finance ministers, is also set to review the GST returns filing cycle and make it taxpayer friendly.


The panel may rationalise rates in sectors where the total incidence of taxation has gone up because the goods were either exempt from excise or attracted lower VAT rates under the previous indirect tax regime.

As the GST Council tries to accommodate industry concerns on tax rates, after estimating the impact on revenue, a rationalisation of items in the 28 per cent tax bracket is expected.

“Most of the daily-use items like shampoo could be lowered to 18 per cent. Tax rate on items like furniture, electric switches and plastic pipes could be relooked at,” an official said.

Besides, making the composition scheme more attractive is on the agenda and as per the Group of Ministers (GoM) recommendations, the Council may decide to allow businesses in inter-state trade to opt for the arrangement.

The GoM had also suggested slashing tax rate to 1 per cent for manufacturers and restaurants opting for the scheme from 2 per cent and 5 per cent, respectively.

It was in favour of doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under the composition scheme and tax them at a flat 12 per cent. Currently, non-AC restaurants are taxed at 18 per cent. It also suggested that eating out at hotels that have room tariff of more than Rs. 7,500 should attract a uniform 18 per cent rate instead of any separate category for 5-star hotel, which currently falls under the 28 per cent bracket.

With regard to traders, the GoM came up with a two-pronged approach for taxation under the composition scheme. It suggested that traders who want to exclude sale proceeds of tax-free items from turnover can pay 1 per cent GST. However, for those who pay tax on total turnover, the tax rate has been proposed at 0.5 per cent.

While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis.

With a view to easing compliance burden of taxpayers, the Council is also going to review the requirement of filing three returns every month under the GST set-up.

Businesses have to file returns in GSTR-1, GSTR-2 and GSTR-3 forms for every month. These forms detail outward supplies of taxable goods and/or services, inward supplies for claiming input tax credit and monthly returns.

The review follows businesses complaining about problems in matching invoices while filing July returns. Businesses have also complained of trouble in invoice matching while filing GSTR-2.

“It would be reviewed whether matching of invoices should be done every month or that should be made only quarterly,” the official added.

The Assam finance minister-headed GoM has already suggested allowing all businesses to file quarterly returns under the GST regime, akin to those businesses whose monthly turnover is up to Rs. 1.5 crore.

The first three months of GST rollout have earned a cumulative revenue, including Integrated GST collections, of around Rs. 2.78 lakh crore for the exchequer.