LATEST DEVELOPMENTS IN GST IMPLEMENTATION

[Dr. Sanjiv Agarwal]

The GST Council meeting held on 3^rd June, 2017 at New Delhi succeeded on completing the pending issues on the agenda which inter alia included fitment of rates on textiles, bidi's, biscuits, gold & jewellery etc. Also, it cleared the rules as well as reteriated the stand that GST be implemented from July 1, 2017. Though West Bengal asked for a postponement till September, at the end, GSTC has announced 1^st July, 2017 only as the date for implementation of GST law. Transition rules have also been cleared with some changes, most important being enhancement of limit of taking credit on closing stock by dealers from 40% to 60% and allowing for 100% in certain cases where goods of value of ₹ 25000 or more could be identified (e.g., vehicles, mobile phones, refrigerator etc.)  .

On GST rates, further complexity was added by having multiple tax rates for textiles and foot wear, though gold has been kept at single rate of 3 percent which is considered moderate. This, however become 6^th GST rate, others being 0%, 5%, 12%, 18% and 28%. While cess will be levied on few demerit goods including tobacco products, bidis will be taxed @ 28% but without cess, unlike cigarettes.

Highlights of 15^th GSTC meeting

• GST rates finalized on remaining items
• Packaged food items @5%
• Bidis @28% (no cess)
• Tendu leaves @ 18%
• Gold / jewellery @ 3%
• Solar panels @ 5%
• Footwear @ 5% / costing below ₹ 500) and @ 18% (costing > ₹ 500)
• Rough diamonds @ 0.25%
• Biscuits @ 18%
• Increase on deemed credit to 60% instead of presently proposed 40% if goods in GST slab of 18% or more; 40% if goods are in GST slab of less than 18%
• Differential rates for various textile items from zero percent to 28% [Jute & silk – nil; cotton fiber, yarn, fabric – 5%; readymade garments -5% (below ₹ 1000), 12% (above ₹ 1000), manmade yarn – 18%]
• GSTN fully geared up for 1^st July roll out
• Committee for anti profiteering to be setup
• Next (16^th) meeting of GSTC on 11 June, 2017

It was also decided to refined 50 percent of tax imposed on defense canteens. While deciding on hike in allowing input tax credit from 40% to 60% in case of closing stocks, it was agreed that those who do not have receipts of high value items of ₹ 25,000 or more would be allowed full refund if they are able to produce any evidence of procurement of  such goods. Necessary guidelines are expected on this.

It now appears that little home work is left in march up to GST roll out and as such, GST may be a reality w.e.f. 1^st July, 2017. The Central Government too, appears to be committed towards this goal, although about 10 states are yet to legislate State GST law. This includes the State of Jammu & Kashmir. West – Bengal has already conveyed its reservations holding that West Bengal will not roll out the GST in its present form. If that happens, there could be economic pit falls for the State as well as trade and industry dealing with the State.

The next (16^th) meeting of GST Council has been scheduled for 11^th June, 2017 to review the rates for refinement if the need be and to agree on the implementation of anti profiteering provision which is going to ensure that GST does not result into inflation. Also, the rules relating to e-way bills will be finalized.

While there is no intention to seek postponement by a month or so in this write – up, but it can be said that there is no need for a rigid date of 1^st July, 2017. If GST roll out is deferred by one or two months, heavens are not going to tall but would only add to comfort, confidence and ease of compliance and smooth transition. So deferment could be thought of at this cost.