GST: Distinction between AC, non-AC restaurants may go

A panel set up by the federal indirect tax body, the Goods and Services Tax (GST) Council, on Sunday concluded that there is a case for doing away with the distinction between air-conditioned (AC) and non-air-conditioned restaurants and that both could be taxed at the same lower rate of 12%, two people familiar with the development said on condition of anonymity. The five-member ministerial panel also arrived at the view that the 18% GST rate on AC restaurants may be retained only on those located in five star and above rated hotels. At present, AC restaurants including those in five star and above rated hotels are taxed at 18% GST and non-AC ones at 12%. The idea of taxing AC restaurants at a higher rate was on the assumption that they sell not just food but also amenities. “There is consensus that there is no need for a distinction between AC and non-AC restaurants. It can only create confusion,” said the first of the two people cited above, requesting anonymity.

The final decision will be taken by the GST Council chaired by finance minister Arun Jaitley at its 9 November meeting in Guwahati. The ministerial panel will meet again on 29 October to fine tune the proposals before placing them before the council, the person said. “There has been a convergence on views that the GST rates on restaurants should get lowered. In fact, there is a view that in this age, we should not differentiate between AC and non-AC restaurants,” said the second person cited above, also requesting anonymity.

“It is a logical and rational move. In a value added tax system, there is no need for distinction in rate of tax for various classes of the same service as the same tax rate will yield the exchequer higher tax revenue wherever value addition is high,” said Prashant Deshpande, partner at Deloitte India.

The panel will decide at its next meeting whether AC restaurants should be taxed at 12% with or without the benefit of tax rebates. Under GST regime, these entities get rebates for the taxes they pay on various items used in the course of their business. There have been complaints that many restaurants did not pass on benefit of this rebate to consumers. However, the panel has to examine if denying input tax credit is consistent with GST’s structure.

The members of the ministerial panel are Assam finance minister Himanta Biswa Sarma, Bihar deputy chief minister Sushil Kumar Modi, Jammu and Kashmir finance minister Haseeb Drabu, Punjab finance minister Manpreet Singh Badal and Chhattisgarh commercial taxes minister Amar Agrawal.

The terms of reference given to the panel for examination include “the tax structure of different categories of restaurants, with a view to their possible rationalization or reduction”. The council had originally kept the GST rate on restaurants housed in hotels rated five stars and above at 28% but subsequently lowered it to 18% in June.

Prior to the rollout of GST from 1 July, a service tax of 15% was levied on 40% of the food bills at restaurants, which worked out to 6% of the total food bill. In addition, states used to levy their own value-added tax.


Now, it’s easier to buy from unregistered dealers

The Centre has put into effect the recent GST Council decision suspending the reverse charge mechanism on purchases of goods or services by registered dealers from unregistered dealers within the State. This dispensation will now be available till end-March 2018.

With this move, any registered dealer can purchase goods or services from unregistered dealers without forking out GST under reverse charge.

This move will bring significant compliance relief to large businesses and encourage them to buy from unregistered dealers, say tax experts.

Post the July 1 GST rollout, several large businesses had stopped buying from unregistered dealers owing to difficulties under the reverse charge mechanism — the paperwork and other processes were rather cumbersome.

MS Mani, Partner-GST, Deloitte India, told BusinessLine the latest move is a welcome measure. However, it is hoped that this will become a permanent measure and reverse charge on purchases from unregistered dealers, which essentially nullified the concept of the threshold exemption, is not revived any time in the future, he said.

Date matters

Abhishek Jain, Partner, EY, said the Centre, in line with the GST Council decision, has finally issued the notification.

However, it is important to note that this notification is dated October 13, which means that any such transaction effected prior to this date would be liable to GST, he added.

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GST relief for vehicles purchased, leased prior to July 1

The GST Council has softened the tax blow on vehicles purchased and leased prior to July 1, when the Goods and Services Tax (GST) system was introduced in the country.

It has now reduced the GST rate on such vehicles to 65 per cent of the applicable GST rate (including compensation cess). A back of the envelope calculation shows that the GST rate would now get lowered from a level of about 43 per cent (in most cases) to around 28 per cent.

Meanwhile, an official release said that the GST Council had at its meeting held on October 6 took several decisions to provide relief to old/existing leases of motor vehicles.

The decisions are: Leasing of vehicles purchased and leased prior to July 1, 2017 would attract GST at a rate equal to 65 per cent of the applicable GST rate (including compensation cess); Such vehicles when sold shall attract GST of 65 per cent of the applicable GST rate (including compensation cess); Sale of vehicles by a registered person who had procured the vehicle prior to July 1 and has not availed any input tax credits of central excise duty, VAT or any other taxes paid on such motor vehicles, would also be subject to 65 per cent of applicable GST rate (including compensation cess).

These rates would apply for a period of three years with effect from July 1, the release added.

Commenting on this development, M S Mani, Partner-GST, Deloitte India, said that while the reduced effective rate of 65 per cent (of the applicable GST + compensation cess rate) is welcome, it still falls short of the industry’s expectations as this is significantly higher than the erstwhile rates.

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Changes made to GST regime will strengthen economy: Patanjali’s Balkrishna

Patanjali Ayurved Managing Director Balkrishna today expressed happiness over the sweeping changes made by the Goods and Services Tax (GST) Council in the new tax regime, saying these steps will strengthen the economy.

“The steps taken by GST Council yesterday following Prime Minister Narendra Modi’s initiative have made the new tax regime’s dream come true. These measures will strengthen the economy,” Balkrishna, India’s 19th richest man told reporters on the sidelines of a function here.

“The GST did hurl in transparency in taxation but filing returns under it was cumbersome. The GST Council’s relief to businessmen in filing tax and returns will facilitate the new tax regime,” he added.

Balkrishna has figured as the 19th richest person in Forbes Magazine’s India Rich List 2017 with property worth Rs 43,000 crore.

On this feat, Balkrishna, the close aide of celebrated Yoga guru Ramdev, said “It was Indian culture and its people’s victory that a foreign magazine had to sum up the property of Patanjali – a non registered company.”

To a poser, he said that his company does have a plan to enter the capital market with IPO right now.

He said that they haven’t backtracked from entering the cloth manufacturing segment adding, “we are studying design and quality of fabrics. We are going to foray into this business next fiscal.”

Without naming anyone, Balkrishna said that some people are hellbent to discourage their products.


End of ‘Buy 1 Get 1 free’ offers? Freebies will be taxed under GST regime

Popular promotional schemes such as ‘buy one get one free’ will have to be scrapped under the GST regime as the new indirect tax norms suggest anything classified as ‘free’ will have to forgo input credit.

Various packaged products and food services companies have been offering such freebies to bolster sales. But, most offers have gradually been withdrawn since GST rolled out on July 1.

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A top marketing official at Parle Products told the Economic Times that they might drop such offers, and move to more direct discounts. Though it could create disruption, GST demands it, he said.

For the past eight quarters, the consumer goods market hasn’t been witnessing a good growth, and companies have been relying strongly on such schemes to elevate consumption.

“Given some of the tax implications under GST, our team is evaluating the optimal path forward and we will likely become more selective when giving products as promotional items,” said Godrej Consumer Products’ Managing Director, Vivek Gambhir.

The companies will now have to look for different strategies such as discounts and product giveaways.

Premier food services companies such as Jubilant FoodWorks which runs the popular Dominos Pizza chain and Yum Restaurants which runs Pizza Hut – have also taken the buy-one-get-one schemes off their marketing lists. However, they plan to continue their discounts schemes.

Tax experts said a company supplying anything free has to bear GST on it, and therefore, the policy may extend to the pharmaceutical sector as well.

“As per the GST Act, every time something is sold free of cost, its ‘transactional value’ must be found out and GST paid on it,” ClearTax Chief Executive Archit Gupta said. This means companies may prefer to avoid pre-defined discounts and price reductions to avoid confusion on GST charges on free products and uncertainty on input credit, he said.

Further clarity on such issues is required from the government, the tax experts added.

Officials of the some companies also claim the withdrawal of freebies has nothing to do with GST, and that it is purely to improve profitability.

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Consumers hailed GST, but there’s need for awareness

Consumers across the country have unanimously hailed the Goods and Services Tax (GST), Minister of State in the PMO Jitendra Singh said on Tuesday, stressing the need for launching awareness exercises to overcome certain issues.

“Even though there are some initial reservations among certain sections of trading community during the transition phase following GST rollout, the consumers across India have, by and large, unanimously hailed the One Nation, One Tax GST reform introduced by the central government,” Singh said here.

The minister, however, stressed for launching awareness exercise by the government and other agencies to overcome certain issues related to the new taxation measure.

“The GST has been welcomed by all sections of society, particularly the middle and lower classes. (But) there are certain initial issues, which are more of transitory nature and would be overcome in course of time through the mass awareness exercise launched by the government and other agencies.”

Singh’s remarks after a meeting with the National President of Institute of Cost Accountants of India (ICAI), Manas Kumar Thakur.

Thakur informed that his organisation had opened a website ( which contained a help desk page that could be accessed by anybody from anywhere for their queries about GST.

In his meeting with the minister, the ICAI President disclosed that, on an average, there were at least 50 to 60 important queries being received online, the response to which was being provided in a time-bound manner within 24 hours, with the help of 60 experts spread all over the country.

Singh appreciated the services rendered by ICAI and other similar organisations which had a stake in the GST implementation.

He also suggested that like the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India could also introduce specialized courses for its members to deal with the new nuances related to the GST.

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GST Council raises cess on cigarettes to fix anomaly under GST

The goods and services tax (GST) Council raised the cess on cigarettes Monday to address an anomaly under the new regime that had resulted in lower tax incidence than before. The move will raise the prices of cigarettes that had fallen under the GST regime, which rolled out July 1.

Cigarette maker ITC had been the biggest gainer from the anomaly with its stock rising nearly 10% from end-June levels, more than double the rise in the broader market over this period. An ITC spokesperson said the company was studying the details of the move. The increase in cess ranges from `485 per 1,000 sticks for filter cigarettes of up to 65 mm length to `792 per 1,000 sticks for those of 70-75 mm. In the case of other filter cigarettes, the tariff will rise by 31%. The new rates took effect at midnight.

Finance minister Arun Jaitley said the anomaly would have cost the government Rs 5,000 crore in tax and benefited companies in the sector.

“GST Council meeting was called after an anomaly was detected in the compensation cess on cigarretes. Impact of the cascading was not factored in, which resulted in windfall gains for cigarette companies… This was not the intention of the GST Council,” Jaitley said, adding that the council reviewed the cess on cigarettes and decided to increase it. The council met via videoconference.

The weighted average value added tax (VAT) rate on cigarettes was 28.7% and in line with that, GST was kept at 28%. In addition, compensation cess was to be levied at 1.05 times the specific rate, or 5% extra, the specific excuse duty rates.

“However, this method of calibrating the compensation cess did not take into consideration cascading of taxes (that is, in earlier regime, VAT being charged on value inclusive of the excise duty). As a result, the total tax incidence on cigarettes in GST regime has come down, as compared to the total tax in pre-GST regime,” the finance ministry said in a statement. “While any reduction in tax incidence on items of mass consumption would be welcome, the same would be unacceptable in case of demerit goods like cigarettes.”

The tax rate of 28% and ad valorem cess of 5% remains the same except in the case of other items falling in the cigarette category.

Jaitley said registration of existing taxpayers who are migrating from the previous tax regime had exceeded 7 million. He said fresh registrations had crossed 500,000 and another 250,000 were in the process of being approved.

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GST on property: 7 things you should know

Being pegged as a revolutionary tax reform since Independence, the Goods and Services Tax+ (GST) is likely to eliminate the complex and ambiguous tax structure plaguing the country currently. To bridge the gap between the government, developers and consumers, Magicbricks organised an event ‘Real Estate – The RERA and GST Era’ in New Delhi recently.

single indirect tax-structure regime+ , the move is expected to make tax collection seamless across India. With the Union government fixing 18% GST rate for under-construction properties with full Input Tax Credits (ITC) for the real estatesector but excluding the cost of land, here is a list of key takeaways from the new law:

Real estate will be taxed at 18%:

Under revised order from the government, under-construction properties will be taxed at 18% which includes 9% SGST plus 9% CGST. The government has also allowed deduction of land value equivalent to one-third of the total amount charged by a developer, thus, making the effective tax rate as 12%. “However, in the new regime the quantum of ITC will be higher though overflow of credit is restricted. The price of a property is an outcome of demand and supply dynamics, not taxes alone,” says S Satish, executive director, RSM Astute Consulting Group. “Imposing GST on land would have just resulted in land costs rising further at a time when the government is pushing its agenda of affordable housing nationally,” adds Ramesh Nair, CEO & Country Head, JLL India.

Stamp duty and property tax to eventually be subsumed:

Stamp duty and registration charges are outside the ambit of GST now because these are state levies while property tax is a municipal levy. “In many countries where GST has been implemented, it includes immovable properties as well,” says Satish. Although the government says that it has plans to eventually subsume these levies into GST, when and how it will be done is yet to be seen.

Detailed returns need not be filed this year:

KPMG Partner (Indirect Tax) Priyajit Ghosh says that the new law was a challenge on the compliance front and the government has agreed to take a lenient view for the first couple of months. “The government has said that a detailed return need not be filed by traders/businessmen only a summary return would suffice,” said Ghosh. Satish adds that returns can be filed in summary but individual transactions have to be uploaded in the system.

Teething issues inevitable:
Deepak Kapoor of Gulshan Homez said multiplicity of rates in the previous regime had created a lot of confusion. “Teething issues, inflationary pressures and certain short-term adverse impact will make compliance difficult in the first 12-15 months. But global precedence says that GST has been beneficial,” adds Tina Rakyan, director (Finance), Hines India.

Post-GST, some tax issues will become easier to handle as there would be no overlapping jurisdiction between the Centre and states with regards to levies on services and goods. “Seeking redressal of a taxation issue would be far easier because in the new regime the same rule would apply to everyone,” explains Ghosh. However, Satish adds that new issues related to classification, composite and mixed supplies, ITC etc can crop up.

 Transition period a pain for developers, consumers.

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Peanut candy to attract only 5% GST, not 18%

MADURAI: “Kadalai mittai”, the traditional peanut candy, will be taxed under the 5% slab only in goods and services tax (GST) and not 18% as was being construed.

Commissioner of Central Excise, Service Tax and Customs R Saravana Kumar clarified on Sunday that it would be taxed under the 5% slab, putting an end to the controversy of it being charged more than pizza.

The clarification came at the public interaction meeting on GST here presided over by Union minister of commerce and industry Nirmala Sitharaman.

The Madurai District Tiny and Small Scale Industries Association (Maditssia) and Industrial Estate Association on Sunday said that they were holding these interaction meetings on GST to make the people understand it better.

The GST council is not a central government council, but a council that has come with constitutional backup and consists of finance ministers of the 29 states and seven Union territories and the Union finance minister as members.

“No decision is made without these representatives holding consultations with the various organisations in their respective states,” Sitaraman said. “I think it was done in Tamil Nadu too,” she said.

When a representation was made by idly dough manufacturers’ association for cutting GST, the minister said idli dough production was something unique to Tamil Nadu. She would take up its tax exemption with the council as in the case of other perishable food products like eggs, milk and vegetables.

She said the representation made for gunny bags, concrete hollow blocks and used and virgin plastics among other things would be considered. On pizza, the Union minister said that 5% GST was for the readymade pizza dough and that a ready-to-eat pizza attracted 18% GST.

GST was a consumption-based tax and there were apprehensions that manufacturing states like Gujarat, Punjab, Tamil Nadu and Haryana would stand to lose due to lesser consumption in their states, but these states would be compensated, she said.

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Traders dig out loopholes to pay less, avoid tax

A Chennai shopkeeper has begun to split the bill for a pair of shoes, selling each separately. A garment dealer is selling the quintessential dupatta separately from the salwar suit that it ostensibly belongs to.

A leading basmati company, which established its brand with extensive print and electronic advertising for years, is seeking to withdraw trademark registration. It has informed the trade about other brands not being trademarked to claim tax exempt status.

Businesses are relying on innovative ways to beat the norms to ensure their products remain exempt or at lower rates under the goods and services tax (GST) that rolled out on July 1.

Most businesses are taking advantage of the GST Council’s attempts to protect consumers, especially the aam aadmi. Footwear of less than Rs 500 faces GST of 5% while that above it is charged at 18%. Apparel under the GST regime attracts a tax rate of 5% if priced below Rs 1,000 and 12% above that.

“Structurally, having different tax rates for differently priced goods creates classification disputes and litigation since there is an inclination on part of the taxpayer to find ways of charging a lower rate,” said Bipin Sapra, partner, tax and regulatory services, indirect tax, EY.

Similarly, GST is zero on some food items. This includes cottage cheese or paneer, natural honey, wheat, rice and other cereals, pulses, flour of cereals and pulses, other than those in containers and bearing a registered brand, in which case GST is 5%. The government is not amused by what businesses are doing. It is one thing to modify goods to avail lower rates and another to misuse the provision.

“This was not the intent,” said a government official, adding the council can revisit the framework if the trend increases. Sapra said, “If GST rate is to be determined on the basis of registered brand name, there may be products not registered but equally popular. Basis of rate determination should be more objective and non-discriminatory.”

Misuse has become possible because of multiple rates under GST — exempt, 0%, 5%, 12%, 18%, 28% and 28% plus cess. Central government officials, who had seen classification disputes under central excise duty, were not much in favour of differentiation in rates on the basis of value. The view was that goods under the same HSN (Harmonised System of Nomenclature) should be at the same rate.


items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List