The GST in India: Tax Rates Slashed, Some Compliance Relaxed
Last week, the GST Council announced the biggest tax re-shuffle since the launch of the Goods and Services Tax (GST) on July 1, 2017.
Many businesses in India were frustrated that authorities had placed their goods into a high tax category – hitting manufacturers where it hurt most.
Now the GST council is attempting to make the GST more business-friendly, slashing rates for goods in high tax categories. All changes come into effect today, November 15, 2017.
Tax slab revised
The list of items in the highest tax bracket – 28 percent – has been cut down to 50 from 228. Now, only luxury goods and items such as auto parts, cement, paint, tobacco, and cigarettes remain in the highest tax bracket.
The GST Council shifted a wide range of mass use items to a lower 18 percent tax slab. As a result, many products will cost less, including food and edible products (such as cocoa products, non-alcoholic beverages, and wafers); goggles and wristwatches; facial make-up, shampoo deodorants, washing powder detergent, tire tubes for bicycles and three-wheelers; as well as, stones and ceramic products.
The GST Council has also pruned the18 percent slab:13 items have been moved from 18 percent to 12 percent slab, while six items have been shifted from 18 percent to the 5 percent slab.
A detailed list of the changes can be found here.
Composition scheme changed
The GST Council has announced a new two-pronged approach for traders and manufacturers under the composition scheme.
Traders and manufacturers that want to exclude sale proceeds of tax-free items from their total turnover can register for the scheme and obtain a 1 percent GST rate. Those that want to pay tax on total turnover can obtain a 0.5 percent GST rate.
No inter-state taxes and input tax credit (ITC) for composition dealers will be levied.
Deadlines for filing returns relaxed
Business owners will find some relief in a simplified GST filing process: the GST Council extended the deadline for filing of GSTR-3B until March 31, 2018.
Moreover, the GST Council simplified the GSTR-3B and will introduce indicative filing facility for businesses that have zero tax liability or have no transactions to file in the invoice.
Late filing fines softened
The GST Council has waived late fees for the months of July, August and September 2017, for the GSTR-3B form.
From October 2017 onwards, the late fee amount payable by a taxpayer (whose tax liability for that month was zero) will be US$0.3 (Rs. 20) per day, instead of US$3 (Rs. 200) per day. For other tax filers, the late fee will be US$0.8 (Rs 50) per day.
The GST Council has levied a single GST rate at flat five percent against all restaurants, without ITC benefits. However, five-star restaurants within starred-hotels with room rent above US$115 (Rs. 7,500) will attract GST at 18 percent – these restaurants can avail ITC benefits.
Taxpayers will annual aggregate turnover of up to US$229 (Rs. 15 million) will need to file GSTR-1 on a quarterly basis, while taxpayers with a turnover of above US$229 (Rs. 15 million) need to file GSTR-1 on monthly basis.
Exporters from Nepal and Bhutan can now avail of ITC on output services.
India Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, Indonesia, Russia, the Silk Road, & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at email@example.com or visit us at www.dezshira.com.
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
The third edition of Tax, Accounting and Audit in India is updated for 2017, and provides an overview of the fundamentals of India’s tax, accounting, and audit regime. The guide also includes a detailed introduction of the Goods and Services Tax (GST) that was launched on July 1, 2017, representing the complete transformation of India’s indirect taxation structure.
In this edition of India Briefing Magazine, we make the case for why now is the right time for foreign firms to invest in India’s IT sector. Firms can take advantage of the existing IT infrastructure, new industrial verticals, proliferation of technological startups, and federal incentives. Finally, we discuss India’s talent procurement advantages, with its labor pool of STEM (science, technology, engineering, and mathematics) graduates.