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GST Rates Lowered For Restaurants, 211 Items

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Eating out may be cheaper and prices of 211 items could fall as the Goods and Services Tax Council lowered rates as it continues to review the nationwide tax four months after rollout.

The apex GST body, in its 23rd meet held in Guwahati today, reduced the tax rate on all restaurants to 5 percent. They will, however, not get any input tax credit. Earlier, airconditioned restaurants were taxed at 18 percent and the others at 12 percent. Rates on five-star hotels remains 28 percent.

“There is a fear that with the input benefit going, probably the prices will be hiked. I don't think so,” Adarsh Shetty, president, Ahar – Indian Hotel & Restaurant Association, told BloombergQuint. “The prices will be stagnant, and wherever we can, we will definitely pass on the benefit to our consumers.”

Pratik Jain, leader-indirect tax at PwC, said a lower rate on restaurants without an input credit may not be the best decision for a tax policy as it breaks the compliance chain, which is not desirable. “The decision seems to be based on the belief that the industry has not passed on the input credit benefit to customers. It means that industry in general will have to be very careful in terms of anti-profiteering provisions or face a strict action.”

The rate on 178 items was brought down from 28 percent to 18 percent. These include everything from shampoos and detergents to ceramic tiles and perfumes. Only 50 items remain in the highest tax bracket, including air conditioners, washing machines, paints and cement.

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The rates on a host of other items falling in other tax slabs, including condensed milk, spectacle frames, pasta, chutney powder, frozen fish, desiccated coconut and chikkis, were also lowered.

“Due to anti-profiteering provisions and market dynamics, this should lead to reduction in prices for consumers,” Jain said. It would be good if the 28 percent list is further pruned in next few months, which will lead to fewer tax slabs, he said.

The GST Council unanimously decided that only sin goods should remain in the 28 percent tax bracket, Bihar Chief Minister Sushil Modi told reporters. Lower rates will lead to a revenue loss of Rs 20,000 crore, he said.

Easier Returns, More Time

Businesses will continue filing GSTR-3B returns till March, Finance Secretary Hasmukh Adhia said. For small taxpayers, or people with no liability, the process will be simplified. The government has found that nearly 30-40 percent taxpayers had no returns to be filed, he said.

Only GSTR-1—the return for sale of goods and services— will be filed this financial year.

Deadlines for taxpayers with a turnover of less than Rs 1.5 crore:

  • Pending invoices for GSTR-1 will be filed by Dec. 31.
  • For October-December, all invoices need to be filed by Feb. 15.
  • Invoices for January-March must be filed by April 30, 2018.

Deadlines for businesses with turnover above Rs 1.5 crore:

  • GSTR-1 for July-October should be filed before Dec. 31.
  • Such taxpayers will file GSTR-1 monthly after 40 days. For example, the returns for November will have to be filed by Dec. 10; returns for December will have to be filed by Jan. 10, and so on.
  • For taxpayers under the composition scheme, the deadline for filing GSTR-4 has been postponed to Dec. 24 from Oct. 18. Such taxpayers have to file returns quarterly. About 15 lakh taxpayers have opted for the scheme.

Late Filing Penalty

  • In cases where there is no transaction to be reported, the fine for late filing will be reduced to Rs 20 a day from Rs 200.
  • For others, the penalty will be reduced to Rs 50 a day from Rs 200.

Composition Scheme Cap To Be Hiked

Finance minister Arun Jaitley said the government will pass an amendment to increase the cap for the composition scheme to Rs 2 crore from Rs 1.5 crore. The scheme allows small businesses with a turnover within the limit to pay taxes at a fixed rate without getting any input tax credits.

The rate for traders and restaurants stands at 1 percent. The council expects most restaurants to opt for the 5 percent rate instead, the finance secretary said.

The tax rate for dealers under the composition scheme will now be applicable on the taxable turnover, and not the total turnover like earlier.

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