The goods and services tax collection exceeded the 1 lakh crore mark for the 11th month running in May, providing a significant reprieve to the central government, which is facing external and internal headwinds. Rolled out on July 1, 2017, GST had subsumed 17 central and state levies. States now have indirect tax autonomy only over excise revenues from fuel and liquor, as well as stamp duties. And five years on, the GST regime is still evolving. The 47th GST Council meeting took place in Chandigarh and concluded on Wednesday afternoon with Union Finance Minister Nirmala Sitharaman speaking to the media.
The Council agreed to waive mandatory registration for small online sellers, giving the unorganised sector an uplift. Online sellers with an annual turnover of Rs 40 lakh or Rs 20 lakh in small and select states will be exempt from GST registration beginning January 1, 2023. The change is expected to benefit 120,000 small business owners. Small offline sellers are currently excluded from mandatory registration.
While reports suggested that online gaming, casinos, and horse racing could face a 28 % GST, putting them on par with gambling, the council decided to further consider the tax rate and method of valuing such services. On the rationalisation of tax rates, the council has not taken up the issue and a ministerial panel has been given three months to submit its report.
At the time of GST implementation, the Centre decided to compensate states for any revenue loss from the new tax for five years. The deadline is June 30. Several states, mostly led by the opposition, have asked for an extension of GST compensation, citing a two-year pandemic. However, the GST Council did not decide on it. The proposal will most likely be revisited at the next meeting.
Meanwhile, the council has also accepted the recommendation by the group of ministers on correcting the inverted duty structure. A host of items now attract higher GST.
For instance, LED lamps, ink, knives, blades, power-driven pumps, and dairy machinery will attract 18% GST, higher than the existing 12%. Further, the GST rate on solar water heaters and finished leather was hiked from 5% to 12%.
The GST council has proposed to withdraw tax exemptions for a few items along with rate changes for a few others. Exemptions have also been removed for a variety of services, including hotels with a daily rent of less than Rs 1,000, hospital room rents (excluding ICU) exceeding Rs 5,000, and services provided by the RBI, Irdai, and Sebi. The council also wants to tax all postal services except postcards and inland letters, book posts, and envelopes weighing less than 10 gm. Unpacked and unlabeled goods, on the other hand, are still exempt from GST.
In addition, the council has reduced the GST on certain goods and services. It provided relief to the transportation sector by lowering rates for ropeway transportation and truck/goods carriage rentals that include the cost of fuel.
The council has allowed states to decide on the criterion above which an e-way bill can be generated when deciding whether to bring a movement of gold and precious stones under the e-way bill regime. The ministerial panel has recommended a Rs 2 lakh and above the threshold.
The GST council has also decided to form a ministerial panel to address various issues raised by states before the GST appellate tribunal.