The implementation of GST will go down in history as one of the most fundamental landmark reforms in Indian taxation.

Before GST, the combination of VAT, Excise, Central Sales Tax and the cascading effect of tax on tax resulted in the standard rate of tax being as high as 31% in many cases.

The multiple markets across India, with each state charging a different rate of tax, led to huge inefficiencies and costs of compliance. Under GST, compliance has been improving steadily. Taxpayer base has almost doubled to 1.24 crore.

GST has reduced the rate at which people have to pay tax. The revenue neutral rate as per the RNR Committee was 15.3%. Compared to this, the weighted GST rate at present, according to the RBI, is only 11.6%.

GST

Now, Businesses with an annual turnover of up to Rs 40 lakh are GST exempt (for goods). Initially, this limit was Rs 20 lakh. Additionally, those with a turnover up to Rs 1.5 crore can opt for the Composition Scheme and pay only 1% tax (for goods).

For services, Businesses with turnover upto Rs 20 lakh in a year are GST exempt. A service provider having turnover upto Rs 50 lakh in a year can opt for composition scheme for services and pay only 6% tax.

Once GST was implemented, the tax rate on a large number of items was brought down. As of now, the 28% rate is almost solely restricted to sin and luxury items. Out of a total of about 230 items in the 28% slab, about 200 items have been shifted to lower slabs.

Significant relief has been extended to the construction sector, particularly the housing sector. It has now been placed at the 5% rate. GST on affordable housing has been reduced to 1%.

The taxpayer base has almost doubled since the roll out of GST. The numbers of assessee covered by the GST at the time of its inception were about 65 lakh. Now the assessee base exceeds 1.24 crore.

All process in GST has been fully automated. Till now 50 crore returns have been filed online and 131 cr e-way bill generated.

Composition rate lowered from 2% to 1% for manufacturers, Composition scheme extended to Services, special lower rates prescribed for construction, restaurants etc without ITC, rates reduced on 400 items (goods) and 80 items (Services) since roll out of GST.

Common-use items such as hair oil, toothpaste, and soap have seen their tax rates come down from 29.3% in the pre-GST era to just 18% under GST.

Appliances such as fridges, washing machines, vacuum cleaners, food grinders and mixers, vegetable juice extractor, shavers, hair clippers, water heaters, hair dryers, electric smoothing irons, TVs (up to 32 inches) have all seen tax rates lowered from 31.3% to 18% due to GST.

The tax on cinema tickets, earlier anywhere between 35% to 110%, has been brought down to 12% and 18% in the GST regime.

Most items of daily use are in the zero or 5% slab. The construction of residential complexes saw a steep reduction in rates to 5% in general and 1% for affordable houses. Restaurants were also brought down to 5%.

Description of Goods

Pre-GST Rate (%)

Current GST Rate (%)

Milk Powder

6

5

Curd, Lassi, Butter Milk

4

0

Unbranded Natural Honey

6

0

Ultra High Temperature Milk

6

5

Cashew Nut

7

5

Raisin, Spices, Soyabean Oil, Groundnut Oil

6

5

Wheat

2.5

0

Rice

2.75

0

Palm Oil, Sunflower Oil, Coconut Oil, Mustard Oil, Other Vegetable Edible Oils

6

5

Sugar

6

5

Sweetmeats

7

5

Ketchup & Sauces, Mustard Sauces, Toppings, Spreads and Sauces

12

12

Mineral Water

29.3

18

Agarbatti, Footwear (Price up to Rs.1000 per pair)

10

5

Tooth Powder

17

12

Hair Oil, Toothpaste, Soap, Baby Carriages

29.3

18

Kites

11

5

Other Footwear

21

18

Paints and Varnishes (including enamels & lacquers)

31.3

18

Refrigerator and other cooling/freezing equipment, Washing Machine, Vacuum Cleaners, Domestic electrical appliances such as food grinders and mixers & food or vegetable juice extractor, Shaver, Hair Clippers, Storage Water Heaters, Immersion Heaters, Hair Dryers, Electric smoothing Irons etc, Televisions upto 32”

31.3

18

LPG Stove, Car for Physically Handicapped Person

21

18

Aluminium Foils, Plastic Items

19

18

LED

15

12

Kerosene Pressure Lantern

8

5

Children’s Picture, Drawing or Coloring Books

7

0

School Bag

22

18

Printers (other than multifunctional printers)

19

18

Staplers

29.3

18

X Ray Films for medical use, Bamboo Furniture

23

12

Diagnostic Kits & Reagents

16

12

Fixed Speed Diesel Engines of Power not exceeding 15HP, Sewing Machine

16

12

Tractor Parts

20

18

Weighing Machinery (other than electric and electronic)

25

18

Cement

35

28

Fly ash bricks and fly ash blocks

16

5

Helmet

20

18

Headgear and Parts thereof

29.3

18

Recorder, CCTV

19

18

Substantial concessions have been extended to the agriculture sector in GST. On fertilisers, the net tax incidence was halved in GST. On agricultural machineries, the tax incidence has come down significantly from 15-18% to 12% and on certain items from about 8% to 5%.

The pre-GST tax incidence on chemical fertilisers was above 10%. (1% excise duty, 2.44% embedded excise duty, about 4% weighted average VAT and 2.5% CST, Octroi, etc.), while in the GST regime all types of chemical fertilisers only attract a 5% tax rate.

Cattle feed, aquatic feed and poultry feed have all been kept at a Nil rate in GST, as have all kinds of seeds. In other words, these vital inputs in the agricultural process do not attract any tax under the GST system.

With effect from FY 2019-20, the Composition Scheme was extended to suppliers of services (up to Rs.50 lakh turnover). Further, composition taxpayers were allowed to furnish returns on an annual basis only as against having to file quarterly returns as was the case earlier.

Addressing the issues faced by small taxpayers, the GST Council simplified the annual returns and filing was made optional for small taxpayers having turnover upto Rs. 2 crore for both 2017-18 and 2018-19.

Filing of “Nil” GST returns through the SMS facility from the registered mobile number has been introduced which is expected to help almost 22 lakh Nil filers. A big step forward towards enhancing taxpayers’ convenience.

A total of 131 crore e-waybills have been generated since the launch of the system, of which about 40% are for the inter-state transport of goods.

The number of e-waybills generated has been growing steadily, with the highest single-day generation (25,19,208 e-waybills) taking place on 29.02.2020.

In light of COVID-19, taxpayers were given certain compliance-related relaxations to ease their burden. Relief was provided by way of payment deferrals, reduced interest rate, and waiver of late fee/capping of late fee to Rs 500 in certain cases.

For smaller taxpayers with an annual turnover of up to Rs 5 cr, the rate of interest for late filing of GSTR-3B returns halved to 9% if filed by Sep 30, 2020.

The mandatory requirement of filing returns & statement of outward supplies using digital signature was relaxed.

Date for filing GST annual returns of FY 18-19 extended to September 30, 2020.

Rate of Interest for late filing of GSTR-3B returns for May, June and July has been reduced to Nil if filed by specified date in September.

Late fee for filing returns waived for February-July returns if filed by due dates in September.

Due dates has been extended for those opting for Composition Scheme.

Late fee was waived for filers of GSTR-1, all GST compliances deadines that fell during March-Aug has been extended till August 31, 2020.

*****

Disclaimer: This article or blog or post (by whatever name) is based on the writer’s personal views. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. This article has been published for knowledge sharing purpose only.

The author is a practicing Chartered Accountant with an overall 20 years’ experience in both Industry as well as an independent practice and can also be reached at cacafe4you@gmail.com.

Source: Ministry of Finance, GOI

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