GST Council releases latest round of reforms

Initially, India’s Goods and Services Tax (GST) sent a surge of panic through the business community. Everyone from small shopkeepers to multinational companies and even tax consultants faced new and numerous compliance requirements, high tax rates, and a portal that was less than smoothly operational. 

Six months have now passed since the GST implementation, and although there are still some concerns, continuous adjustments by the GST Council have alleviated much of the panic. 

At its 25^th meeting, held on 18 January, the GST Council provided more relief to taxpayers by reducing additional GST rates, relaxing some compliance requirements, and introducing other reforms that are expected to boost India’s economy. 

The reduced rates took effect 25 January, with as many as 29 items and 54 service categories now having a reduced rate, benefiting several of India’s business sectors. The council also reduced many late fees and provided additional recommendations and guidance regarding e-way bills and the return filing process. 

Used cars now cheaper

The used car market constitutes a significant portion of the automobile market. In an expected boost to the industry, the council reduced the GST rate on medium and large used cars and SUVs from 28 to 18 percent and small used cars to 12 percent. 

In addition to the reduction in GST, the council removed cess (the additional tax on tax) previously charged on used cars. Used car sellers will not be able to avail input tax credit of GST paid, however.

The automobile industry is expected to enjoy a boost as prices of used cars drop significantly due to the GST rate reduction and removal of cess. 

Rate reduced on diamond and precious stones

The GST Council also reduced the tax rate on rough diamonds and precious stones, from 3 to 0.25 percent. This reduction provides a huge relief for diamond exporters, who require a huge amount of working capital to operate.  

Government facilitates drip irrigation and biopesticide use

The council lowered the GST rate on drip-irrigation systems, mechanical sprays, and biopesticides from 18 to 12 percent. The resulting price reductions are expected to attract farmers to use biopesticides, instead of chemical pesticides, and encourage them to make use of drip irrigation.  

Lower working capital for fertilizer manufacturers

The council also reduced the GST rate on phosphoric acid from 18 to 12 percent, which will reduce the input tax for fertilizer manufacturing companies. This will help reduce the amount of working capital these companies need. 

Fun outings more accessible

Those seeking fun and entertainment will find lower admission prices to amusement parks, theme parks, water parks, joy rides, merry-go-rounds, go-carting, and ballet, as the GST charged on admission prices has been lowered from 28 to 18 percent. This is expected to boost the entertainment industry, as fun and entertainment will be cheaper than before. 

‘Achhe din’ arrives as LPG become cheaper

For liquefied petroleum gas (LPG) supplied to household domestic consumers, the GST rate has been cut to 5 percent from the previous rate of 18 percent. 

Late fees reduced

Late fees for missing the filing deadlines for GSTR-1, GSTR-5, GSTR-5A, and GSTR-6 have been reduced to Rs. 50 per day. Nil filers will be charged Rs. 20 per day. 

Cancellation of registration

Voluntarily registered taxpayers can now apply to cancel their registration at no cost within one year of the effective date. This comes as a huge relief to many, especially small businesses.

For migrated taxpayers, 31 March 2018 will be the last date to cancel registration without incurring a fee. 

GSTR-3B to be continued

The requirement to file form GSTR-3B will continue for at least the next few months. Also, taxpayers will be able to file nil returns with a single click, avoiding other cumbersome processes. 

E-way bill requirement starts 1 February

The government had been deferring the e-way bill mechanism since GST implementation in the absence of a robust IT system. However, the government is ready now with a fully operational e-way billing IT system.

As of 1 February, businesses must generate e-way bills for every interstate movement of goods valued at Rs. 50,000 or more. This will bring more transparency to the GST system and help reduce tax evasion. 

Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application, Avalara India GST, can help you with GST compliance automation, contact us through https://www.avalara.com/in/products/gst-returns-filing.