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GST Council reduces rates for certain supplies and approves rules on e-way bill

As per media reports, the 20th GST Council meeting, held on 5 August 2017 included discussion on matters relating to e-way bill, anti-profiteering measures and revision in tax rates of certain goods and services.

The key decisions taken at the council meeting are summarized below:

  •  Revision in GST rates: •     Job work services across the textile chain will be taxed at 5%. •     For goods transport agencies and rent-a-cab service, an option has been provided to pay GST at 12% and claim full ITC.   •     Aggregators offering small house-keeping services (eg. plumbing) will be liable to pay GST on the services provided through them.   •     Works contract provided to Government will be taxed at 12%.
  •  Approval of e-way bill rules: Rules on e-way bill were approved and are likely to be implemented from 1 October 2017. The rules specify pre-registration of all goods valuing more than INR 50,000 before they are moved for supply beyond 10km. •  Increase in cess on motor vehicles: The Council has recommended to increase maximum ceiling of cess leviable on motor vehicles from 15% to 25%.   •  Anti-profiteering measures: The Council approved setting up of Central and state- level anti-profiteering committees in the next 15 days.

The next GST council meeting is scheduled on 9 September 2017 to decide on revision of rates for other items.

Comments: a.    The notification to give effect to the changes in GST rates is awaited. It will need to be seen whether the new rates are made effective retrospectively from 1 July 2017. b.    Reduction in the tax rate on job work across the textile supply chain is a welcome step and will provide much awaited relief to the textile industry. It will also help correct the anomaly of inverted tax structure faced by the industry. c.     Exemption from e-way bill for transportation of goods could have been extended to transportation within the city or town, instead of restricting it to 10km. d.    Finalized rules on e-way bill should be placed in the public domain soon, to help industry prepare for the compliance. e.    Based on international experience, the government should provide for a clear mechanism to compute benefits under GST in order to be compliant with anti-profiteering provisions. This will avoid unwarranted litigation. Industry should also analyze the impact of GST on their goods and services considering the changes in cost structure and profitability.