GST rates decided on 1,211 items: Milk and cereals exempt, foodgrain to be cheaper

SRINAGAR, May 18: The Centre and states agreed on Thursday to exempt most food items including wheat, rice and milk from the Goods and Services Tax (GST) but kept the levy at 18% for manufactured goods.

Other household items such as sugar, tea, coffee and edible oil will attract 5% GST, senior officials said after a meeting of the GST Council in Srinagar.

The council fixed the rates for over 1,200 items under the GST, which the government plans to roll out on July 1.

Hailed as the the country’s biggest tax reform since Independence, GST will unify Asia’s third largest economy into a common market, eliminating a string of central and state levies.

“There is no increase in taxes of the items considered today. In fact, for many of them, taxes have come down,” finance minister Arun Jaitley told reporters in the capital of Jammu and Kashmir.

The Narendra Modi government is keen to ensure a seamless transition to GST, which is expected to shore up state and federal tax revenues, cool inflation and accelerate economic growth by 1-2 percentage points in the medium term.

Revenue secretary Hasmukh Adhia said 81% of the items will attract tax of 18% or below. Only 19% of items will be taxed at the highest rate of 28%, he said.

The tax on coal has been fixed at 5% as against the current 11.69%.

The finance minister said out of 1,211 items, rates on all barring six have been decided.

The GST Council will discuss on Friday the rates on services and may meet one more time if tax rates for all items are not decided by then, Jaitley said.

Cereals have been exempted from GST as opposed to current 5% levy, while hair oil, soap and toothpaste will attract 18%, Adhia said.

After the Parliament passing the crucial GST bills in early April, the Centre and states are brainstorming on tax rates of specific items.

A committee headed by Adhia finalised the contentious issues on taxation of specific items with state officials before Thursday’s meeting.

GST Council readies to give final shape to new indirect tax regime

NEW DELHI, May 17: The goods and services tax (GST) Council, chaired by Union finance minister Arun Jaitley and including representatives from 32 states and Union territories as members, will put together the final shape of the indirect tax regime set to kick in from 1 July at its two-day meeting starting here on Thursday.

The Council, where neither Union nor state governments can push through decisions without consensus, will decide on the GST rate that individual commodities and services will attract with the aim of making the transition from the prevailing fragmented tax system revenue-neutral. The meeting will be the Council’s 14th and final one before the roll-out of the largest tax reform since Independence.

The Jammu and Kashmir government is hosting the Council meeting, treating all the visiting ministers as state guests, conferring them the required security. Twenty four state ministers have confirmed their participation. The border state has played key role in making GST a reality. A major breakthrough in the journey towards GST was achieved when J&K chaired the erstwhile Empowered Committee of state finance ministers that reached a consensus with Jaitley in December 2014 on the design of GST within months of the NDA government assuming power at the Centre. J&K finance minister Haseeb Drabu said that the Council meeting in the state signifies its role in national policymaking.

Two officials who are privy to the discussions in the Council said on condition of anonymity that the fitting of commodities and services into the rate slabs has been provisionally done, and now needs to be signed off by the Council.

Also, more items that are currently exempt from central excise duty and state-level value added tax (VAT) will be brought into the GST net. At present, around 99 items enjoy exemption from VAT, while about 250 items are exempted from central excise duty. Under the new regime, there will be a common list of GST exemptions, which are in the nature of essential items of everyday use like foodgrain.

The Council will also clear four sets of rules relating to input tax credit, valuation, transitional provisions, and the composition scheme at its meeting. With this, the legislative work will get completed at the Union level. At the state level, more than 12 states have already cleared their respective state GST laws. They will now have to notify rules under those laws. Before the end of May, all states are expected to compete the legislative work related to GST.

At the technical level, GST Network (GSTN), the company that will manage millions of invoices and GST returns to be filed by companies, has already allowed companies to test the interface of their business software with that of GSTN’s to ensure that the transition is smooth. It is also testing the matching of invoices by different businesses in the supply chain to make sure that tax credits are available to businesses without any hassle.

However, there could be initial hiccups. “There certainly will be teething problems. By 10 August, companies have to file GST returns for the month of July and tax credit settlement will happen shortly thereafter. We will know how the system works when invoice matching for the purpose of tax credits takes place. The Rs20 lakh threshold for GST means that many small entities will be covered by GST. It remains to be seen how prepared they are,” another person with knowledge of the discussions in the Council said, also on condition of anonymity.

Anita Rastogi, partner-indirect tax, PwC India said that finalizing the draft rules and announcement of rates for specific goods and services at this week’s Council meeting is crucial considering that companies have only about 40 days to prepare for the implementation of GST from 1 July.

While fitting all commodities and services into different tax rates, the Council’s idea is to place them at a rate that is closest to their effective tax rate at present. That would involve taking into account the reliefs given at present in the form of applying the tax rate on a partial value of the sale and also the inefficiencies in the current tax system.

Services are likely to be taxed at two slabs--12% and 18%-- while goods are to be taxed at five different rates—5%, 12%, 18%, 28% and 28% plus cess. The gems and jewellery industry is likely to get a special rate between 2% and 5%.

R. Muralidharan, senior director, Deloitte in India said that small and medium enterprises (SMEs) need to gear up for the transition. About 95% of the industrial units in India are SMEs and this sector accounts for 40% of value addition in the manufacturing sector.

Demonetisation effect transitory, says UN expert

UNITED NATIONS, May 17: The demonetisation policy is not expected to have a long term impact on domestic demand in India, which is projected to clock a 7.9 per cent growth in fiscal 2018, a senior UN economic official has said.

"We do not really see that the dynamics of India have shifted very much," Dawn Holland, Senior Economic Affairs Officer, Global Economic Monitoring Unit, Development Policy and Analysis Division in the UN Department of Economic and Social Affairs, told reporters here yesterday.

The official was responding to a question on a UN report released yesterday which revised downward India's economic growth forecast for 2017 but predicted an increased 7.9 per cent GDP growth next year.

"Slower growth this year and faster growth next year is more a shift in the timing of expenditure which is largely related to the demonetisation policy that did have an impact slowing domestic demand in the short term but we do not see this as having a longer term impact," the official said. "It is sort of a transitory effect on the economy as a whole. So (India) still remains one of the fastest growing countries in the world," Holland added.

The UN World Economic Situation and Prospects as of mid- 2017 report, launched here today, said India is projected to achieve a 7.3 per cent growth in fiscal 2017, a downward revision from the 7.7 per cent forecast for the year made when the report was launched in January.

The January report had not taken into consideration the impact of the demonetisation policy on India's economic growth. The revised report projected that India will achieve an impressive 7.9 per cent GDP growth in fiscal 2018, revising upwards its January estimates when it had said India's growth will be 7.6 per cent next year.

Mukesh Ambani leads Forbes list of Global Game Changers

NEW YORK, May 17: Reliance Industries Chairman Mukesh Ambani leads a Forbes list of 'Global Game Changers' who are transforming their industries and changing the lives of billions of people around the globe.

Forbes' second annual Global Game Changers list includes 25 "intrepid business leaders" who are "unsatisfied with the status quo" and "transforming their industries and changing the lives of billions of people around the globe." Ambani, 60, comes at the top of the list for his game changing efforts to bring the internet to India's masses.

"Oil and gas tycoon entered the country's telecom market with a bang, offering fast internet at dirt-cheap prices. Gained 100 million customers in six months and set off a wave of consolidation in the market," Forbes said, referring to his company's mobile network operator Reliance Jio. It quoted Ambani as saying that "anything and everything that can go digital is going digital. India cannot afford to be left behind."

Forbes said the 25 trailblazers on the list are re- imagining countless facets of everyday life, from health to sending money to relatives abroad.

"While plenty of corporate functionaries make headlines for successful turnarounds or record profits, we sought to identify true movers and shakers who are determining the course of the future for more than just their own shareholders or employees," it said.

The list includes founder of home appliances company Dyson, James Dyson, American global investment management corporation BlackRock cofounder Larry Fink, Deputy Crown Prince of Saudi Arabia Mohammed bin Salman, social media company Snap co founder Evan Spiegel, Chinese ride sharing giant Didi Chuxing founder Cheng Wei and African retail tycoon Christo Wiese.

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