Bringing pre-packaged and labeled food items like wheat flour, puffed rice, curd/lassi/chhaas and paneer into the purview of GST, withdrawal of exemption for hotels renting less than Rs 1,000 and reverse duty for many items improve the structure. As edible oil, coal, LED lamps, printing ink, knives and solar water heaters have been approved by the Goods and Services Tax (GST) Council on the first day of its 47th meeting on Tuesday.
The controversial issue of extension of compensation to states beyond June 2022 and 28 per cent GST rate on casinos, online gaming and horse racing is to be discussed on Wednesday.
According to sources, the GST Council has also approved compliance measures including mandatory biometric authentication for high-risk taxpayers, inclusion of electricity bill data, real-time verification of all bank accounts against a unique PAN and geo-tagging .
Compulsory making of e-way bills by states for inter-state transport of gold and precious stones has also been approved by the council, but the decision on the extent has been left to the states.
Reforms in the inverted duty structure and withdrawal of exemptions were part of the interim report of the Group of Ministers on rate rationalization headed by Karnataka Chief Minister Basavaraj S Bommai, which has been given an extension for submission of the final report. It also recommended a 12 percent tax on hotel rooms costing less than Rs 1,000 per day, which are currently exempt, increasing the rate from 5 percent to 12 percent on manufacturing services of leather goods, clay bricks, and LED lamps. GST hike, ink, knives, blades, electric pumps, spoons, forks, dairy machinery from 12 per cent to 18 per cent.
I limited time offer , Rs.2/day with Express Premium Ad-Lite Please click here to subscribe I
It has also sought to bring in pre-packaged food items including puffed rice, wheat flour, curd, lassi along with branded food items with a tax rate of 5 per cent. Currently, 5 per cent GST is levied on branded and packaged food items, while unpacked and unlabeled ones are tax free. In addition, the panel has suggested withdrawal of input tax credit refund for inverted duty structure for edible oil and coal.
With more scrutiny of high risk taxpayers, more compliance measures are being taken to prevent revenue leakage.
To identify risky behavior of new registrants/applicants using Artificial Intelligence and to conduct mandatory physical verification of these taxpayers along with real time verification of bank accounts through integration of GST system with NPCI and Incorporation Keeping the information at the back office for the officer. Certain measures of Electricity Bill Metadata (CA Number) as a data field during registration by new taxpayers are to be discussed in the council meeting.
Rate rationalization measures under GST are being considered in the form of a compensation regime – under which states were offered compensation for revenue loss at a rate of 14 per cent less than the guaranteed compounded rate – as part of the indirect tax regime and the rollout of GST. It ends in June after five years. The weighted average growth rate stood at around 11.6 percent, compared to a revenue neutral rate of 14.4 percent at the time of the 2017 rollout.
In 2021-22, only five out of 31 states/UTs – Arunachal Pradesh, Manipur, Mizoram, Nagaland, Sikkim – reported revenue growth in excess of the protected revenue rate for states under GST. Puducherry, Punjab, Uttarakhand, Himachal Pradesh and Chhattisgarh have recorded the highest revenue gap between protected revenue and gross state GST revenue after settlement in 2021-22. According to the Goods and Services Tax (Compensation to States) Act, 2017, states were guaranteed compensation at a compounded rate of 14 per cent from the base year 2015-16 for losses caused by the implementation of GST.