GST Council is set to take up an interim report by a high-level ministerial panel on rate rationalisation, suggesting hiking rates on a slew of items such as leather goods, printing ink and LED lights to 18 per cent and removing exemptions given to mass products like curd, paneer, puffed rice, oats and millets, reported Business Standard.
The ministerial panel led by Basavaraj S Bommai, chief minister of Karnataka, is likely to table its report to the Council this week. It may also seek three months’ time to submit its final report on restructuring of the current GST slabs.
The report has outlined pruning exemptions on 15 items such as lassi, butter milk, papad, certain foodgrain (oats, millets, bajra), jaggery, and certain vegetables, according to people privy to the interim report.
Explaining the rationale, the panel argued that such exemptions, due to the subjective nature of the term ‘branded’, were causing disputes and revenue leakage, and had been amended multiple times as the complex entry indicates.
The panel noticed that in certain states, revenues from these items have fallen significantly as compared to the pre-GST regime, given that the scope of coverage has narrowed in GST.
It was of the view that the condition of exclusion for such exemptions may be simplified by replacing the term ‘branded’ with the deterministic condition of being ‘pre-packaged and labelled’ for retail sale. It was also felt that pre-packed and labelled items like curd, lassi, puffed rice [these are usually produced by large manufacturers] should attract nominal GST.
Such GST on pre-packed and labelled specified item would in fact provide a level playing field to MSME units whose product would continue to get GST exemptions.
The panel also recommended withdrawing exemption on certain services such as transport of passengers in business class from airports in NE states; registration/licencing supplied by FSSAI to food business operators; and hotel accommodation costing under ₹1,000 per unit/day, which will be taxed on a par with industry (12 per cent).
Hospital rooms, except ICU, with daily rent of ₹5,000 could be taxed at 5 per cent without ITC.