‘Rate reduction expected, populist move by council’
Despite having a stiff revenue target, the GST council announced several rate reductions especially with respect to items which moved to the lower rate from the peak rate of 28%.Updated: Dec 23, 2018 07:55 IST
The GST council meeting effectively maintained a balance between the fiscal deficit and the revenue collection. The finance minister had in mind the quantum of annualised compensation to the states due to loss of revenue.
Despite having a stiff revenue target, the GST council announced several rate reductions especially with respect to items which moved to the lower rate from the peak rate of 28%. The National Anti-Profiteering Authority will be in action after the rate cuts.
While rate reduction was expected and the move may be termed as a populist one, there should not be major impact on revenue collection as various automobile parts, cement and various luxury/sin goods will continue to attract 28% GST.
It remains to be seen how the government will proceed with respect to the pending refunds and the budgetary support to units in certain backward industrial zones. The cinema and entertainment industry has been reeling under a dual burden of excessive tax and recession of entertainment tax benefits given by the States which drove many players to high courts for reliefs.
As a populist measure, the reduction of rates to 18% when ticket cost is more than ~100 and 12% when the ticket cost is less than ~100 will be a welcome relief for movie goers. The theme parks and water parks will have to wait for a little while more to get their share of credit.
One of the most striking announcements is with respect to the inconsistent views of Advance Ruling Authority which appears to be pro-revenue and inconsistent so far. The announcement for formation of a Centralised Authority in case of inconsistency of rulings by two states will certain boost industry confidence.
Advance Ruling Authorities in different states have been passing contradictory Advance Rulings over many important issues.
The GST council has decided to constitute a centralised authority to adjudicate on these contradictory rulings and pass a binding decisions on these contradictory issues. It is hoped that GST council will focus on adequate representation of judicial and non judicial members for this centralised authority.
The agenda for the next council meeting looks very promising and pragmatic. The next meeting will decide the fate of taxability of the residential units taxability. The real estate sector was marred with GST controversies ever since 1 July 2017. Home buyers filed anti-profiteering complaints against construction companies for not passing GST benefits whereas there is a conspicuous gap in the anti-profiteering law with respect to methodology.
Other issues to be decided includes composition scheme for small service providers, threshold limits for exemptions, taxability of lotteries and disaster cess in case of natural calamities.
Abhishek A Rastogi, Partner at Khaitan & Co. (the views expressed are personal)