GST on mobile phones, textiles set to increase

Goods and services tax

(GST) rates on mobile phones, footwear, textiles and fertiliser are likely to be raised on

Saturday, when the GST

Council meets as part of an exercise to correct an inverted duty structure and to boost revenue collection.

The proposal for a monthly lottery scheme for consumers, with a bumper prize of ~1 crore, will also be placed before the Council — the aim is to encourage invoice collection by buyers.

“The inverted duty structure under GST needs to be corrected, it is resulting in huge refunds outgo. Mobile phones, fabric and others could see rate rectification,” said a government official.

Such a structure arises when the GST rate on raw materials is higher than those on finished products, resulting in higher input tax credit (ITC) outgo.

A registered taxpayer may claim refund of unclaimed ITC on account of a higher tax on input and lower tax on output. For example, the GST rate on mobile phones is 12 per cent; those on phone parts and batteries is 18 per cent. Last year, a manufacturer claimed a refund of close to ~4,100 crore. So, one proposal before the Council is to hike the rate on mobile phones to 18 per cent. Similarly, the GST on fabric could be raised from the current one of 5 per cent, to 12 per cent — different types of yarn are taxed at the later rate. Initially, the Council had not allowed fabric makers to claim ITC refund but later relented and allowed these in its July 2018 meeting.