GST on mobiles, fertilisers, footwear & fabric to go up

In the backdrop of the spread of coronavirus and the slowdown in the economy, the GST Council is likely to take a slew of measures, including higher levies on certain items, in its meeting on Saturday.

Deferring the filing of return to a new date of July 1 instead of April 1 earlier, implementation of the e-invoicing system and rationalisation of rates of items such as mobile phones, fertilizers, footwear and textiles are also on the agenda.

According to top official sources, the GST Council has proposed to increase the GST rate on mobile phones and its parts from 12 to 18 per cent. “Similarly, the GST rates on fertilisers, textile (mostly on man-made fabrics and garments) and footwear are expected to be hiked to 18 per cent in the council meeting,” sources said.

Experts said the rate hike would improve working capital positions of the manufactures since it would correct the inverted duty structure, though it may increase the price of finished goods.

Currently, certain manufactured goods attract a tax rate of 5 per cent or

12 per cent while their inputs, input services and capital goods attract GST at the higher rate of

18 per cent or 28 per cent. The manufacturers have to claim a refund of accumulated input tax credit (ITC) where the tax rate on input is higher than the finished goods.

The officials further said that owing to the failure of GSTN software, the council is likely to defer the new return filing system from the earlier envisaged date of April 1. “Also, mandatory generation of e-invoice for business-to-business

(B2B) transactions for businesses with a turnover of over Rs 100 crore is likely to be deferred by three months till July 1,” they said.

On relaxing ITC compliance, they said, manufacturers can have an option of utilising their ITC on inputs, input services and capital goods fully, and help in softening impact on prices. “The refund claimed on account of inverted rate structure is about Rs

20,000 crore per year and there is a need to correct this anomaly," they added.

At present, cellular mobile phones attract 12 per cent duty, while GST on some of its inputs are

18 per cent. With regard to footwear, the council, in June last year, had lowered the GST rate to 5 per cent on items worth up to Rs 1,000, while those above this value attract 18 per cent duty. However, inputs used by the sector attract the GST rate in the range of

5-18 per cent. Similarly, the textiles sector currently has a differential GST rate of

5, 12 and 18 per cent. This leads to difficulty in issuing and claiming refunds by exporters. The GST rate on chemical fertilisers is currently at 5 per cent, while inputs are taxed at 12 per cent.

The lottery scheme under GST would also be discussed in the meeting.