On the 18th of January, 2018, the GST Council conducted its silver jubilee meeting. The 25th meeting was a much awaited one, as it was being held days before the annual budget, and many were expecting some major GST Council updates in terms of returns being simplified, introduction of some sectors into GST and most importantly further rate cuts.

However, most of the topics were deferred for discussion for the next GST Council meeting, which is to be held over video conferencing, just before the Budget is announced. Having said that, this meeting did not disappoint altogether, as it saw rates being cut for 29 goods and 53 services. As per the GST Council news, the new rate changes will be applicable from the 25th of January, 2018.

To know more about the major GST Council updates from their 25th meeting, please read further:

GST Council updates regarding goods

Decrease in GST rates of goods

GST rates for a total of 29 goods were reduced, some of which are as follows:

Particulars / DescriptionExisting RateRevised Rate
Old and used motor vehicles (medium and large cars and SUVs)28%18%
Buses for use in public transport, which exclusively run on bio-fuels28%18%
Old and used motor vehicles (other than medium, large cars and SUVs)28%12%
Sugar boiled confectionary18%12%
Drinking water packed in 20 litre bottles18%12%
Fertilizer grade Phosphoric Acid18%12%
Bio-Diesel18%12%
12 certified bio-pesticides18%12%
Bamboo wood building joinery18%12%
Drip irrigation system including laterals, sprinklers18%12%
Mechanical Sprayer18%12%
Tamarind Kernel Powder18%5%
Mehendi paste in cones18%5%
LPG supplied for supply to household domestic consumers by private LPG distributors18%5%
Satellites and payloads, scientific and technical instruments, apparatus, equipment, accessories, parts, components, spares, tools, mock ups and modules, raw material and consumables required for launch vehicles and satellites and payloads18%5%
Articles of straw of esparto or of other plaiting materials, basket ware and wickerwork12%5%
Velvet fabric12%5%
Diamonds and Precious Stones3%0.25%

NIL rate

In addition, recommendations were made to place the following items in NIL rate category:

  • Vibhuti
  • Parts and accessories for manufacture of hearing aids
  • De-oiled rice bran

Increase in GST rates of goods

In addition, for a few items, an increase in GST rate was also recommended, which are listed as follows:

Particulars / DescriptionExisting RateRevised Rate
Cigarette filter rods12%18%
Rice bran (other than de-oiled rice bran)NIL5%

GST Council updates regarding services

Decrease in GST rates of services

GST rates of about 53 services were reduced, some of which are as follows:

Particulars / DescriptionExisting RateRevised Rate
Admission to theme parks, water parks, joy rides, merry-go-rounds, go-carting and ballet28%18%
Construction of metro and monorail projects (construction, erection, commissioning or installation of original works)18%12%
Common Effluent Treatment Plants services of treatment of effluents18%12%
Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity, which attract GST of 12%18%12%
Mining, exploration services and drilling services of petroleum crude and natural gas18%12%
Tailoring service18%5%
Job work services for manufacture of leather goods and footwear18%5%
Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity, which attract GST of 5%18%5%

Services to be exempted from GST

The GST Council members recommended to move the following services to exempt category:

  • Admission to, or conduct of examination provided to all educational institutions, as defined in the notification
  • Composite supply involving predominantly supply of services i.e. up to 25% of supply of goods
  • Dollar denominated services provided by financial intermediaries located in IFSC SEZ, which have been deemed to be outside India under the various regulations by RBI, IRDAI, SEBI or any financial regulatory authority, to a person outside India
  • Educational institution by way of conduct of entrance examination against consideration in the form of entrance fee
  • Fumigation in a warehouse of agricultural produce
  • Government’s share of profit petroleum
  • Legal services provided to Government, Local Authority, Governmental Authority and Government Entity
  • Providing information under RTI Act
  • Pure services provided to government entities
  • Reinsurance services in respect of insurance schemes
  • Renting of transport vehicles provided to a person providing services of transportation of students, faculty and staff to an educational institution providing education up to higher secondary or equivalent
  • Royalty and license fee includible in transaction value
  • Services provided by and to FIFA and its subsidiaries directly or indirectly related to any of the events under FIFA U-20 World Cup in case it is hosted by India
  • Services provided by the Naval Insurance Group Fund by way of Life Insurance to personnel of Coast Guard under the Group Insurance Scheme of the Central Government retrospectively with effect from 1st July 2017
  • Services provided by senior doctors, consultants and technicians hired by the hospitals, whether employees or not, entire amount charged by hospitals for healthcare services from the patients including the retention money and the fee or payments made to the doctors, food supplied to the in-patients as advised by the doctor or nutritionists
  • Services provided by government or local authority to governmental authority or government entity, by way of lease of land, and supply of land or undivided share of land by way of lease or sub lease where such supply is a part of specified composite supply of construction of flats etc.
  • Transportation of goods from India to a place outside India by air
  • Transportation of goods from India to a place outside India by sea and provided that value of such service may be excluded from the value of exempted services for the purpose of reversal of ITC

Services brought under GST

A few services, which were earlier exempt from GST, were recommended to be brought under the ambit of GST, with the following rates:

Particulars / DescriptionGST Rate
Small housekeeping service providers5% (without ITC)
Tour operator service5%
Time charter services5%
Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of building used for providing mid-day meal scheme by an entity12%

Decrease in GST compensation cess

For the following goods, a complete removal of the GST Compensation Cess was proposed:

  • Motor Vehicles cleared as ambulances, duly fitted with all fitments, furniture and accessories necessary for an ambulance. 10 to 13-seater buses and ambulances
  • Old and used motor vehicles (medium and large cars and SUVs)
  • All types of old and used motors vehicles (other than medium and large cars and SUVs)

Reduction in penalty for late filing of GST Return

The penalty for late filing of GST returns has been further reduced, as per the GST recommendations passed in the meeting. Any business that fails to file GSTR-1, GSTR-5 or GSTR-5A will only have to pay a penalty of INR 50 per day of default. In case of failure to file a nil GST return, the penalty has been reduced to INR 20 per day. The amount includes both CGST and SGST/UTGST i.e. late fee of INR 50 per day is split into CGST of INR 25 and SGST/UTGST of INR 25.

Extension in dates for cancellation of GST registration

One of the significant outcomes of the GST Council meeting was the extension in dates for cancelling the GST registration. All persons who had obtained GST registration voluntarily, were previously barred from surrendering their GST registration before the end of one year from the date of registration. But, the rules have now been modified to allow the cancellation of voluntary GST registration before 1 year. Also, those who had obtained GST registration mandatorily due to migration from VAT or Service Tax or Central Excise can also cancel their GST registration before the 31st of March, 2018.

Trial basis notification of E-way bill

The GST Council formally announced that the facility for generation, modification and cancellation of e-way bills is being provided on a trial basis on the portal www.ewaybill.nic.in. Once fully operational, the e-way bill system will start functioning on the same portal.

Revised Return Filing Model

In this meeting, a special presentation was made by Nandan Nilekani to the GST Council members on a revised and simplified return filing model. However, the GST Council did not reach a consensus regarding the new model and is likely to take further action on this, only after discussing the issues with the States. The new process would be finalised in the next meeting of the GST Council, after a written formulation is circulated to the States, and an approval is obtained for the same.

IGST credit distribution

With a view to improve the overall tax liquidity of the States, it was recommended that IGST credit worth INR 35,000 crore be passed on to the States, as per the GST Council news.

Sectors outside GST

For quite some time, the possibility of bringing petroleum products and real estate under GST was being discussed. In this meeting, although the same was discussed, but the GST Council did not reach any conclusion, and the decision on the same has been deferred to the next meeting.

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Pramit Pratim Ghosh

Author: Pramit Pratim Ghosh

Pramit, who has been with Tally since May 2012, is an integral part of the digital content team. As a member of Tally’s GST centre of excellence, he has written blogs on GST law, impact and opinions - for customer, tax practitioner and student audiences, as well as on generic themes such as - automation, accounting, inventory, business efficiency - for business owners.