GoM on rate rationalisation makes proposals for the upcoming 47th GST Council meeting

The Group of Ministers (GoM) formed for GST rate rationalisation met on 17th June 2022, making some key proposals. It shall be placing an interim report before the GST Council, scheduled to meet on 28th and 29th June 2022 at Chandigarh.

Sources to media publications claim that the interim report mentions that any of the GST Council’s decisions must be perceptive of public interests, requiring careful considerations, especially for pruning the list of GST exemptions. 

Certain items such as agriculture-related machinery, hearing aids, utensils, tractors, educational institutions, bread, and incense sticks must be exempted. The report has suggested the Council remove the exemption in a phased manner on items such as puffed rice, honey, foodgrain, cereals, jaggery, flattened rice, parched rice, pappad, packaged curd, lassi, buttermilk, paneer, and certain vegetables.

While the unroasted coffee beans, green tea leaves unprocessed, wheat bran and de-oiled rice bran could be charged at 5%, and cheques could be charged 18% in loose or book form. E-waste could see a GST rate hike from 5 to 18%, while petroleum and coal bed methane products may face a withdrawal of a 5% GST rate reduction.

The list of items that will face discontinuance of GST exemptions includes the services by the GST Network to the government, SEBI, IRDA to insurers, FSSAI to the food business operators related to registration and the RBI. 

Accommodation in hotels charging a daily room rent of less than Rs.1,000 per room is taxed 12% as the rest of the industry. Except for ICU, the hospital rooms with a daily tariff of Rs.5,000 could be taxed at 5% without the input tax credit. Moreover, cord blood banks that were earlier exempted will no longer enjoy the relaxation. 

The interim report of the GoM may also propose corrective measures for inverted tax structures prevailing in the system. It includes writing, printing, drawing ink, lamps, fixtures, and LED lights, to mention a few. Most of these items have tax rates ranging between 12% and 18%. These may be raised from 12% to 18% to correct the inverted structure. However, as an exception, the edible oil will likely face disallowance of any refund of input tax credit due to the inverted tax structure.

Apart from the above, the GST Council could take up the matters that bother the e-commerce sellers in India. Many e-commerce suppliers have written to the Ministry of Finance, claiming that they face several GST compliance issues and complications.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@clear.in