GST on mobile phones hiked to 18%
The decision to hike the rate on mobile phones was taken in the 39th GST Council meeting chaired by the FM. GST on mobile phones raised to 18%; small businesses get relief on late fee.
Mobile phones will attract an 18% goods and services tax (GST) rate from April 1, 2020, up from existing 12%, after the GST Council corrected the inverted duty structure that was being faced by the industry.
Union Finance Minister, Nirmala Sitharaman said the decision was taken not to increase the prices but to correct the inverted structure of duty on some products wherein the rate of tax paid on inputs purchased is more than the rate of tax on finished products on outward supplies.
The Council, however, deferred rationalising the tax structure of fertilizers, man-made yarn, fibre and footwear, to the next meeting.
"Mobile phones and specified parts to attract 18% versus 12%. All other items, if there's a need to calibrate the rates, to remove the inversion, we can take them up in future, examination of that can happen at a later time," said finance minister Nirmala Sitharaman after conclusion of the 39th GST Council meeting on Saturday.
GST for maintenance, repair and overhaul service providers in India has been lowered to 5% from 18% now, with provision of availing full input tax credit (ITC). “This will assist in setting up of MRO services in the country,” the finance minister added.
“Increase of GST rate on mobile phones to 18%, arguably to correct the inverted duty structure, may lead to increase in prices,” said Pratik Jain, Partner and Leader Indirect Tax, PwC India.
“Given the current economic scenario, perhaps an option to provide quicker refund of input tax credit (including on input services which is not allowed currently) could have been explored,” he added.
The Council also approved 60 additional skilled people and better hardware for improving capacity - for handling 3 lakh entries instead of 1.5 lakh at present - for Infosys, to drastically improve issues faced by taxpayers to file returns and other documents on the GST Network. The Council gave a deadline of July 2020 to make the improvements in stages, instead of the January 2021 time limit sought by Infosys chief Nandan Nilekani.
The Council decided new returns will be made effective from July 2020, while interest on delay in payment of GST will be charged on the net cash tax liability. The law will be amended to bring in the change retrospectively from July 1, 2017. The Council decided to defer implementation of e-invoicing and QR Code till October 1, 2020, and exempted companies in the insurance, banking, financial institution, non-banking financial institution and passenger transportation service sectors from issuing e-invoices or capturing dynamic QR code.
The Council also approved Aadhaar authentication for new taxpayers, and said that ‘Know Your Supplier’ facility will be introduced, to provide basic information of suppliers. Further, late fees won’t be levied on delayed filing of returns and reconciliation statement for FYs 2017-19 for businesses having turnover upto Rs 2 crore, aiding MSMEs. Last date for filing of returns and reconciliation statement for taxpayers below Rs 5 crore income has been extended to June 30, from March 31, 2020.
