Computer screens, power banks likely to take GST cuts on Saturday

Big-ticket rate cuts unlikely at upcoming Council meet owing to revenue shortfall

The goods and services tax (GST) rates for items such as computer screens and power banks are likely to be slashed from 28 per cent to 18 per cent at the GST Council meeting on Saturday. 

However, the Council would refrain from reducing the rates for big-ticket items such as cement and auto parts, which are part of the 35 items that fall in the top slab.  

Thomas Isaac, finance minister of Kerala, told Business Standard any rate cut at this point of time would not be right, and should be avoided. 

“We are rushing through rate cuts, and it was visible in the July meeting. We need more stability till revenues are assured, and till then GST rates should not be cut,” he said. 

Officials close to the development said the rate cuts would be of the nature of rationalisation.

“The rate of 28 per cent for computer screens of more than 20 inches is likely to be brought at par with those for smaller computer screens and television screens,” an official said. Similarly, he said, the 28 per cent rate for power banks used for smartphones could be brought down to 18 per cent in line with that for normal batteries. If this gets passed, it would apply to bigger uninterrupted power supply (UPS) devices used for purposes other than charging phones.

The Council may stop at these items as far as rate rationalisation is concerned because GST collections have fallen short of the target in six out of eight months till November in 2018-19. 

The government needs Rs 1.16 trillion, on average, in the remaining four months of the year to match the budget estimate of Rs 12.3-12.4 trillion.

“The government does not have much room for rate cuts on big items,” the official said. Its downward revenue impact could be substantial, he said. 

Officials said states were increasingly becoming averse to rate cuts because some of them, such as Punjab, Himachal Pradesh, Uttarakhand, Bihar and Karnataka, are facing huge shortfalls in comparison to the revenue to be protected.

With the 28 per cent slab pruned generously twice, first in November 2017 and then in July 2018, states have become more averse to further pruning.

John Joseph, member (budget) in the Central Board of Indirect Taxes and Customs, said last week compliance was still a big hurdle despite the introduction of the e-way bill. Though this is the case, compliance enforcement might take the backseat in the next couple of meetings owing to next general elections, officials said.

Exporters are facing delays in receiving payments in lieu of their refund applications, an issue the Prime Minister’s Office had taken note of last month. Businesses faced hassles due to refund forms being in physical format, and the time lost in scrutiny and reconciliation.  “The Council intends to reduce the burden of filing physical refund applications by mandating the physical submission of only those invoices which are not part of the GSTR-2A,” another official close to the development said.

GSTR 2A is an automatic return generated for a taxpayer from his seller’s GSTR-1 form.

As for the procedural aspects, the rules for the Central GST and Integrated GST Acts will be amended to make them commensurate with the amendments made in the laws in August.

The new rules likely to be finalised in the December 22 meeting will create categories of businesses that fall under the reverse charge mechanism (RCM). Businesses under the RCM have to do self-invoicing of returns for goods supplied by units not registered under the GST.

Experts said there could be two classes of businesses under the RCM — those under the composition scheme and those who are not, with different rules applicable to the two.

After the regime change in MP, Rajasthan and Chhattisgarh, GST Council could turn out to be acrimonious for the first time since the inception of the new tax. Officials said in the meetings here on, the element of certainty would be reduced.


Targets set
 

• Officials close to the development said the rate cuts would be of the nature of rationalisation
• The rate of 28 per cent for computer screens of more than 20 inches is likely to be brought on a par with those for smaller computer and television screens
• The 28 per cent rate for power banks used for smartphones could be brought down to 18 per cent, in line with that for normal batteries