GST Council cuts tax rate on 178 items; all restaurants to be taxed at 5%

The GST Council, which held its 23rd meeting in Guwahati on Friday reduced the tax rate on 178 items from 28 per cent to 18 per cent. GSTCouncil also brought all AC and non-AC restaurants in the 5 per cent GST bracket without the input tax credit.
The GST Council, which held its 23rd meeting in Guwahati on Friday reduced the tax rate on 178 items from 28 per cent to 18 per cent. GSTCouncil also brought all AC and non-AC restaurants in the 5 per cent GST bracket without the input tax credit (ITC). Only 50 items, mostly demerit, sin and luxury goods will be in the 28 per cent tax bracket.

All members of the GST Council felt that input tax credit (ITC) to restaurants is not passed on customers. Goods and Service Tax (GST) was being charged on existing rates which put additional tax burden on restaurant goers. Thus, we decided that restaurant industry will not get the benefit of ITC, Finance Minister Arun Jaitley said.

Rates for all AC and non-AC restaurants will be 5 per cent. "Since they did not pass on the ITC benefit to customers, they will not be eligible for the benefit themselves," Jaitley added. Restaurants in hotels will cost the same, except in starred hotels which charge Rs 7,500 or more. The rate for restaurants in starred hotel will remain 18 per cent. Outdoor catering will be taxed at 18 per cent along with ITC, the Finance Minister added.

Taxpayers with turnover up to Rs 1 crore will have to file invoices once every quarter, whereas those with turnover above Rs 1 crore will have to file their invoices every month, Finance Secretary Hasmukh Adhia said in a press conference after the GST Council meet.

Finance Secretary Hasmukh Adhia said that tax payers with zero tax liability will now have it much easier. The GST Council has decided in today's meeting that filing of return for GSTR-3B will continue till march 2018. All taxpayers will have to file only GSTR-1 in the current year.

If there is a nil GST return to be filed, then the fine for late filing instead of Rs 200 per day will be Rs 20. For other taxpayers, it will Rs 50 per day instead of Rs 200. "At the same, we do not want people to be late as on the last day we get the data for IGST. Delayed filing might eat into states getting their share," Adhia said.

"Meanwhile, invoice matching will not be given up. Pending invoices for July to September will be filed by December," said the Finance Secretary. Additionally, GSTR-3B will be made simpler by making it more interactive, Adhia added.

Annual turnover eligibility for composition scheme will be increased to Rs 2 crore from the present limit of Rupees 1 crore under the law. Thereafter, eligibility for composition will be increased to Rs 1.5 Crore per annum, the Finance Ministry said in a release.

There will be a uniform rate of tax at 1 per cent under composition scheme for manufacturers and traders and no change for composition scheme for restaurant, the release added. Also, supply of services by composition taxpayer upto Rs 5 lakh per annum will be allowed by exempting the same.

While replying to a question on the revenue loss on account of GST, the Finance Minister said, "a lot of transitional credit is still blocked. I don't think a final word on the basis of first three months can be said."

Tax on diabetic food, pasta, curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasoning, condensed milk, spectacles frames was brought down to 12 per cent from existing 18 per cent.

Meanwhile, West Bengal Finance Minister Amit Mitra said aggregate revenue loss for Centre due to GST stood at Rs 60,000 crore and revenue loss for states is at Rs 30,000 crore.

"Lower 18 per cent GST will be levied on chewing gums, chocolates, after shave, deodorant, washing power, detergent, marble," Bihar Deputy Chief Minister Sushil Modi had earlier said. The all-powerful council pruned the list of items attracting the top 28 per cent tax rate to just 50 from 227 previously, Modi told reporters here. In effect, the council cut rates on 178 items.

Tax on pasta, jute bags and has been brough down from 18 per cent to 12 per cent.

"There were 228 items in the 28 per cent slab. The fitment committee had recommended that it should be pruned to 62 items. But the GST Council has further pruned 12 more items," Modi said. He said all types of chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoo, deodorants, washing powder detergent and granite and marble will attract lower 18 per cent tax rate.