In a major relief to traders and businessmen across the country, the GST Council has decided to increase the limit on input tax credit from the earlier proposed 40%, bringing some respite on sale of inventories stocked up before the implementation of the new tax regime on July 1.
Distributors and dealers had begun cutting down on the stock of goods lying with them ahead of the implementation of GST, as the earlier proposed rules provided for them to claim tax credit for only up to 40% of their total GST liability against the excise duty already paid on the goods purchased before July 1.
However, with today’s increase in the limit of the input tax credit that they can claim, the companies could sigh a breath of relief as it would cushion the impact on sales in the month leading up to the levy of the new tax.
The GST Council, which is meeting today to decide the tax rate on remaining six items, has finalised all the pending rules, including those on transition and returns, for the implementation of the most sweeping tax reform in the country since independence in less than a month from now.
The council is yet to discuss the tax rate to be levied on the six items, including gold, bidis and biscuits, when its meeting resumes at 3 pm later today, TV news channels reported from Vigyan Bhawan in New Delhi, where the meeting is underway.
Earlier last month, the GST Council, tasked with tasked with framing rules for implementation of most sweeping tax reform India has ever seen since independence, finalised the rate of tax on over 1,200 items and most of the services, while deferring decision on six items including gold to today’s meeting.
The council has proposed four tax slabs at 5%, 12%, 18% and 28% under GST, while exempting essential or daily consumption items and services from tax levy, such as fresh meat, fish, chicken, eggs, milk, curd, natural honey, fresh fruits, vegetables, flour and bread, and healthcare and education services. Other than this, it levied cess over and above the 28% tax on certain luxury goods and sin goods. The GST Council kept 81% of the items in the first three tax brackets, ie, up to 18%. The 12% and 18% tax bracket together account for two-thirds of all items.
GST seeks to unify the entire country into a single market with only one value-added tax levy on all the goods and services across states at the point of consumption, subsuming up to 16 different taxes and levies that are imposed at present. This is expected to make the movement goods across the state borders smoother, faster and easier, though some experts have raised concerns over the complications that could arise out of a multiple tax-slab structure.