GST rate cut on 20 to 25 products as government looks to revive ailing economy

Here is a summary of the recommendations made by the council, all of which will be implemented starting October 1, 2019

GST rate cut on 20 to 25 products as government looks to revive ailing economy

The GST Council, chaired by the Finance Minister, Ms Nirmala Sitharaman conducted the 37th GST Council Meet in Goa on September 20, to chart a roadmap for laws and procedures pertaining to GST rates on goods and services as well as rejig the corporate tax structure for domestic businesses.

Giants across business sectors including auto manufacturing and FMCG, through lobby groups have cornered the government into reconsidering the GST structure amid slowing economic indicators and a stifling liquidity crisis.

Here is a summary of the recommendations made by the council, all of which will be implemented starting October 01, 2019.

GST exemptions

A host of products and services are exempted from GST under the following heads:

Insurance: Personnel from the Central Armed Paramilitary Forces and their family members under group insurance schemes and farmers from West Bengal who have applied for insurance under Bangla Shasya Bima are exempt from GST. 

Warehousing: Various pulses, cereals, fruits, vegetables, raw fibers and unmanufactured products such as coffee, tea and tobacco, etc. stored at warehouses or storage units will not attract GST.

Agriculture: Supply of products to Food and Agriculture Organisation (FAO) and various agricultural machinery such as wheels and pulleys will be exempt.

Export Promotion: R&D services provided by Indian Pharma and Software companies to foreign businesses will be exempt under Section 13(13) and 13(13)(a) respectively of the IGST Act, 2017.

Others: Exemption on import or export of Silver or Platinum by specified nominated agencies, import of specific non-indigenous defence products (till 2024), all products and services associated to FIFA Women’s Football World Cup in India, conditional exemption on exports via sea or air (till September 30, 2020), products imported for the Navy, etc.

GST rate change on Goods

GST on the following products have been reduced

  • Marine fuel: 5% from 18%
  • Dried tamarind: 0% from 5%
  • Plates and cups made from bio-friendly material: 0% from 5%
  • Slide fasteners: 12% from 18%
  • Cut and polished precious stones: 0.25% from 3%
  • Compensation Cess for petrol and diesel based passenger vehicles reduced to 1% and 3% respectively

GST on the following products have been increased

  • Railway wagons and coaches: 12% from 5%
  • Caffeinated beverages: 28% + 12% compensation cess from 18%
  • Polythene bags: 12% from 5%

GST rate change on Services

Hospitality: GST on room tariffs less than Rs 1,000 will be nil, and 12% and 18% respectively for tariffs between Rs 1,001 to Rs 7,500 and those above Rs 7,500.

Catering: Services with a daily tariff rate over Rs 7,500 will attract a GST of 18% with Input Tax Credit (ITC) for third party vendors and 18% with ITC or 5% without ITC for inhouse caterers.

Job work Services: Services related to diamonds will now incur a GST of 1.5% from 5%, and machine job work for the engineering industry will be 12% from 18%.

Other changes

Many other revisions and procedural changes have been implemented too. A panel of officers will be constituted as well to simplify forms and design a new return system to be introduced by April 2020.

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