GST UPDATE ON CHANGE IN RATE OF GOODS

28^th GST Council Meeting Update

We have prepared a number of GST updates on 28^th GST Council Meeting held on July 21, 2018. Below are GST Rate change on goods recommendations as decided in this GST meeting with our observations on these amendments are as under:-

List of Goods on which GST Council has recommended rate reduction/ Exemption:-

GST Rate reduced to Nil Rate/Exemption clarification

Stone/Marble/Wood Deities-

This does not mean marble is exempt. Only the Deities made of marble or made of stone or made of wood is exempt.

Rakhi [other than that of precious or semi-precious material of 71 i.e.without precious material].

Recently there was AAR ruling of West Bengal state wherein it was decided that Rakhi is taxable. Hence, to overturn this AAR ruling, the exemption is given. But it implies that it was taxable previously. Litigation is bound to happen for previous period.

Sanitary Napkins

There was demand from the sections that this product should be exempted. But earlier Finance Minister Mr. Arun Jaitely has explained in an interview with TV channel that exemption will lead to loss as ITC and the prices will not come down. But after GST council meeting currently acting Finance Minister Mr. Piyush Goyal was asked about the same but he has brushed aside the this question saying that do not pay weight age to professionals. Prices will surely come down. But this has not happened as there was news in Newspaper that prices have not come down and industry told that it is due to loss of ITC.

It is perplexing to note that the Government issued a Press Release dated 10th July 2017, explaining the logic of applying a GST rate of 12 per cent on sanitary napkins instead It is perplexing to note that the government issued a Press Release dated 10 July 2017, explaining the logic of applying a GST rate of 12 per cent on sanitary napkins instead of nil. The press release reported, “Reducing the GST rate on sanitary napkins to nil, will however, result in complete denial of ITC to domestic manufacturers of sanitary napkins and zero rating imports. This will make domestically manufactured sanitary napkins at a huge disadvantage vis-à-vis imports, which will be zero rated.”
But this logic has been brushed aside in this meeting and exemption is given to sanitary napkins.

Therefore, whether the GST Council’s decision to exempt sanitary napkins was beneficial to the public or not, only time would tell.

Coir pith compost
Sal Leaves siali leaves and their products and Sabai Rope
Phool Bhari Jhadoo [Raw material for Jhadoo]
Khali dona
Circulation and commemorative coins, sold by Security Printing and Minting Corporation of India Ltd [SPMCIL] to Ministry of Finance.
Milk enriched with vitamins or minerals salt (fortified milk)
Water supplied for public purposes (other than in sealed containers)

GST Council was exempt from GST on above category of goods. The rate has been reduced to Nil. The Government has requested manufacturers of these products to transfer the entire benefit to the end user.

However, does a lower tax rate always translate to reduction in the end price to the consumer? This may not be true. Lower output tax rate on any product does not necessarily mean that the embedded tax cost in the manufacturing of the product and its supply chain has reduced.
Let us take the example of medical services. While medical services provided by hospitals are exempt — liable to nil GST rate — input and input services used by hospitals to provide medical services attract GST rates of 28 per cent or 18 per cent or 12 per cent. Land taken on lease for running a hospital and annual maintenance services attract GST of 18 per cent, surgical equipment and consumables used in operation theatres attract GST of 18 per cent or 12 per cent, air-conditioners used in hospital attract GST at the rate of 28 per cent. Hospitals have a small output GST liability on account of sale of medicines to out-patients. Thus, in the absence of adequate output GST liability, input GST paid on aforesaid goods and services used by hospitals adds to the cost of medical services and does not make them cheaper.

GST Rate reduced to 5%

Item/ Goods Name	Old GST Rate	New GST Rate
Chenille fabrics and other fabrics under heading 5801	12%	5%
Handloom Dari	12%	5%
Phosphoric acid (fertilizer grade only).	12%	5%
Knitted cap/topi having retail sale value not exceeding Rs 1000	12%	5%
Bamboo flooring	12%	5%
Brass Kerosene Pressure Stove.	12%	5%
Hand Operated Rubber Roller	12%	5%
Zip and Slide Fasteners	12%	5%
Ethanol for sale to Oil Marketing Companies for blending with fuel	18%	5%
Solid bio fuel pellets	18%	5%
Footwear having a retail sale price up to Rs. 1000 per pair	12%	5%
Handmade carpets and other handmade textile floor coverings (including namda/gabba)	12%	5%
Handmade lace	12%	5%
Hand-woven tapestries	12%	5%
Hand-made braids and ornamental trimming in the piece	12%	5%
Toran	12%	5%
Tamarind Kernnel Powder, Modified or Unmodified	Clarification	5%
Beet and Cane Sugar to include refined beet and cane sugar	Clarification	5%
Marine engine	Clarification	5%
Kota Stone, other than marble and granite	Clarification	5%

GST Rate reduced to 12%

Item/ Goods Name	Old GST Rate	New GST Rate
Fuel Cell Vehicle	28%	12%
Handbags including pouches and purses; jewellery box	18%	12%
Wooden frames for painting, photographs, mirrors etc	18%	12%
Art ware of cork [including articles of sholapith]	18%	12%
Stone art ware, stone inlay work	18%	12%
Ornamental framed mirrors	18%	12%
Glass statues [other than those of crystal]	18%	12%
Glass art ware [ incl. pots, jars, votive, cask, cake cover, tulip bottle, vase ]	18%	12%
Art ware of iron	18%	12%
Art ware of brass, copper/ copper alloys, electro plated with nickel/silver	18%	12%
Aluminium art ware	18%	12%
Handcrafted lamps (including panchloga lamp)	18%	12%
Worked vegetable or mineral carving, articles thereof, articles of wax, of stearin, of natural gums or natural resins or of modelling pastes etc, (including articles of lac, shellac)	18%	12%
Ganjifa card	18%	12%
Fuel Cell Vehicle	28%	12%
Handbags including pouches and purses; jewellery box	18%	12%
Wooden frames for painting, photographs, mirrors etc	18%	12%
Art ware of cork [including articles of sholapith]	18%	12%
Stone art ware, stone inlay work	18%	12%
Ornamental framed mirrors	18%	12%
Glass statues [other than those of crystal]	18%	12%
Glass art ware [ incl. pots, jars, votive, cask, cake cover, tulip bottle, vase ]	18%	12%
Art ware of iron	18%	12%
Art ware of brass, copper/ copper alloys, electro plated with nickel/silver	18%	12%
Aluminium art ware	18%	12%
Handcrafted lamps (including panchloga lamp)	18%	12%
Worked vegetable or mineral carving, articles thereof, articles of wax, of stearin, of natural gums or natural resins or of modelling pastes etc, (including articles of lac, shellac)	18%	12%
Ganjifa card	18%	12%

GST Rate reduced to 18%

Item/ Goods Name	Old GST Rate	New GST Rate
Paints and varnishes (including enamels and lacquers)	28%	18%
Glaziers’ putty, grafting putty, resin cements	28%	18%
Refrigerators, freezers and other refrigerating or freezing equipment including water cooler, milk coolers, refrigerating equipment for leather industry, ice cream freezer etc	28%	18%
Washing machines.	28%	18%
Lithium-ion batteries	28%	18%
Vacuum cleaners	28%	18%
Domestic electrical appliances such as food grinders and mixers & food or vegetable juice extractor,shaver, hair clippers etc	28%	18%
Storage water heaters and immersion heaters, hair dryers, hand dryers, electric smoothing irons etc	28%	18%
Televisions upto the size of 68 cm	28%	18%
Special purpose motor vehicles. e.g., crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries	28%	18%
Works trucks [self-propelled, not fitted with lifting or handling equipment] of the type used in factories,warehouses, dock areas or airports for short transport of goods.	28%	18%
Trailers and semi-trailers.	28%	18%
Miscellaneous articles such as scent sprays and similar toilet sprays, powder-puffs and pads for the application of cosmetics or toilet preparations.	28%	18%
Footwear having RSP more than 1000	18%	18%
Kota Stone, Ready to Use and Polished	Clarification	18%

As per Section 117 of CGST Act, 2017which provides that it is mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices.
The crux of the anti-profiteering rules is-

If there is reduction in rate of tax on the supply of goods or services or
Benefit of input tax credit is now available under GST

Then a registered person must pass on the benefit by reduction in prices otherwise the Anti profiteering will be looking after the same. But reduction of prices depends on many vital factors. This is not true that the reduction in duty rate will clearly bring down the prices in same proportion. Even the reduction in MRP of goods already packed at factory location as well as at depots or shops cannot be done immediately. Moreover, at the same time supply chain cannot be disturbed. Even correction in MRP is against the provisions of Legal metrology Act. Market forces will bring down the prices automatically. Forcing the same through anti profiteering measures is not the right step.

You can reach us at www.capradeepjain.com, at our facebook page on https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/as well as follow us on twitter at https://www.twitter.com/@capradeepjain21

We hope the above is useful to you.

Your Need Our Concern…

Thanking you,

Regards,

Pradeep Jain, F.C.A.

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GST UPDATE ON CHANGE IN RATE OF GOODS

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