The Goods and Service Tax (GST) has changed the tax landscape of the Indian economy dramatically. Many taxes have been subsumed into it, such as sales tax, VAT, various duties, and local taxes. This is a very significant change and one which has transformed everything, from the way taxes are collected right through how they are computed and filed.
Since GST is still in its infancy in India and there are amendments still being made to it, a business owner must keep up with the latest GST news to be within the ambit of the law. During implementation, there were many problems related to GST, such as the tax slabs and what businesses fall under it. Those have been tweaked and ironed out over time. There are many areas that may be changed in the future, so it is imperative to be up to date on the latest GST news.
The GDP of the country has been declining in recent months due to global and local headwinds. It has almost declined to 5% in the last quarter and the government has decided to tweak the GST again.
At the 37th GST council meeting in September 2019, many changes were announced to kick start growth in the country.
- The hotel industry is a huge driver of employment in India and due to economic problems in that sector, the government has announced a tax reduction. There will be no GST on hotel accommodation costing less than Rs 1000 per day and transactions between Rs. 1000 - Rs. 7500 per day would attract GST of 12%, while transactions of Rs. 7500 or more a day would attract a GST of 18%.
- Jewelry exports would attract zero GST from now on to boost exports.
- The tax rate on cut and polished semi-precious stones have been reduced to 0.25% from 3%.
- Work and services related to diamonds will attract a GST of 1.5% from the earlier 5% which will give a boost to the industry.
- Machining works and services in the engineering sector will attract a tax rate of 12%, 6% lower than the earlier rate of 18%.
Some of the products which got a tax hike include caffeinated beverages which will now attract a tax rate of 28% from the previous 12%, including a 12% compensation cess.
The government is trying to create a viable economic model to introduce green vehicles such as electric vehicles into the country to mitigate climate change. To change consumption habits in the auto industry, the government is trying to reduce taxes to try and make people buy more electric vehicles.
Due to this, the tax on electric vehicles has been reduced from 12% to 5% making it competitive with respect to internal combustion engines. The council has also cut tax rates pertaining to Electric Vehicle charging, from 18% to 5% to further enhance uptake of these vehicles.
28% GST Slab
The 28% GST slab has been a bone of contention since the introduction of the Goods and Services Tax. Many people feel that for a country such as India a tax rate of 28% is too high and is not sustainable. The government seems to have paid attention and reduced the GST rates of 6 items which removed them from the 28% bracket. Some of the items which are still on this list include cement, luxury automobiles, motorcycles, and yachts.
Movie tickets priced above Rs. 100 are also cheaper now coming down from the 28% slab to the 18% slab. Things such as video games and Lithium-ion power banks will now attract 18% GST instead of 28%. Even monitors and television screen taxes have been reduced to 18% from the earlier 28%.
Other Significant Changes
- Conditional GST exemption validity has been extended to exports by air or sea till 30th September 2020.
- The new GST Returns system which was to be implemented now has been deferred to April 2020. This is a very good decision and has been appreciated by businesses because changing over to a new system of tax filing is problematic and can cause a lot of disruption. So with this delay, businesses can prepare and start afresh next year.
- GSTR-9 has been made optional for smaller businesses. Taxpayers whose turnover is below 2 crores during FY 2017-18 and FY 2018-2019, can choose not to file GSTR-9 after the date notified by the Central Board of Indirect Taxes and Customs (CBIC).
- Restrictions on ITC claim on GSTR-3B. The Input Tax Credit has been restricted for the recipients if the suppliers have not provided the details of outward supplies.
- The council has waved off GSTR-9A for composition taxpayers for FY 2017-18 and 2018-19. It is expected that GSTR-9A will be discontinued as the functions will be subsumed by form GSTR-4 which will have an annual declaration of turnover and tax details.
- Storage of food and raw materials is a problem in India due to the lack of appropriate warehousing and temperature-controlled facilities. Therefore, high taxes on any such storage facilities are problematic. That is why the council has exempted storage and warehousing services for cereals, pulses, fruits, nuts, vegetables and spices, sugarcane, jaggery, raw vegetable fibers such as cotton, flax, jute, etc. Rice, coffee, and tea have been exempted as well.
- A new act will also be instituted due to J&K being designated Union Territories.
The last important thing which was announced was the mandatory Aadhar requirement for registration of taxpayers under GST and there are talks to make it mandatory for claiming refunds as well.
As you can see, GST is very dynamic as it is tweaked as per the social and economic situation of the economy. It is still progressing towards something better and fine-tuning is still required to create a highly robust system.