GST council modifies the GST rates

Based on representations from industry and industries associations, the Fitment Committee (FC - a body formed under GST Council comprising tax official of both centre & state) reviews rates, including compensation cess and decides on the merits of a change in tax rates. Its recommendations are placed before the GST Council, which accepts or rejects them.

Motor vehicles and biscuits may have lobbied prominently when GST Council decided not to lower the rates last week, but beneath the news radar, 165 other categories, including ghee, butter, cheese, and dry fruits, met with the same fate. After FC analysed the procedural issues in respect of over 200 categories of goods it finally recommended changes or clarification for 32 categories of goods, and deferred the decision in respect of 10, but left the rates of 167 categories of goods untouched.
Ghee, cheese and butter attract GST at 12 %. There had been representations seeking that it be lowered to 5 %. As of now, these products are sold largely by the organised sector, by companies such as Amul and Mother Dairy. Other small manufacturers can avail themselves of threshold exemption, the FC reasoned, and recommended no change.

Another proposal was for lowering GST on all convenience instant food mixes – idli mix, vada mix, dosa mix, gulab jamoon mix, thandai mix – from 18 % to 5 %. The FC noted that these goods are consumed by better-off sections of society, who can afford the rate. Instant food mix products are manufactured by large corporations and a rate reduction may not be passed on to consumers, but may lead to profiteering; hence no change was recommended.

The proposal for lowering GST rate on helmets, after the Motor Vehicles Act was amended, did not find favor with the FC. Inputs for helmets attract 18 % GST, and lowering the rate on helmets to 12 % may result in manufacturers seeking refund of unutilized input tax credit, with associated financial and administrative costs.