Sanitary napkins to be tax free; fridge, washing machine, scents to become cheaper

Sanitary napkin will be free from Goods & Service Tax (GST). At the same time, buying fridge, washing machine and small TV will be cheaper and as GSTs on major white goods items have been lowered to 18 per cent from 28 per cent.

The GST Council, under the Chairmanship of interim Finance Minister Piyush Goyal, has decided to lower rates on over 50 products categories which in turn will benefit more than 100 products. At its 28th meeting here on Saturday, the Council decided to slash GST on handicrafts items to 0 per cent from 18 and 12 per cent. It also agreed to lower levy on ethanol to 5 per cent from 18 per cent and on foot wares costing up to Rs 1,000 to 5 per cent from 12 per cent. Earlier, this lower rate was applicable only on foot wares costing below Rs 500.

Other items which saw rate reduction include kerosene stove (18 to 12 per cent), paint and varnish (28 to 18 per cent), scent/perfumes (28 to 18 per cent), mixer and grinders (28 to 18%), water heaters (28 to 18 per cent), handicraft products such as hand nags, jewellery bags etc (18 to 12%() and hand made carpet, floor covering etc (12 to 5 per cent). All the new rates wiil be applicable from July 27.

When asked about revenue implication due to rate cuts, Goyal said, it will be minimal as compliance will increase, consumption will increase and so as there will be tax buoyancy. He said that when there will be assessment, then revenue collection will be higher than revenue forgone. Meanwhile, it is estimated that rate reduction in 28 per cent slab to 18 per cent alone is estimated to cost Rs 6,000 crore.

Pratik Jain, Partner & Leader (Indirect Tax) at PwC said that out of 49 items currently taxed at the highest rate of 28 per cent rate on about 17 items have been reduced to 18 per cent. “This should help to boost consumption of these widely used products, with the festive mood set to kick-in soon. Reduction of tax rate on paints and varnishes to 18 per cent should help in reducing the construction related cost,” he said.

Return Simplification

The Council approved the new return formats and associated changes in law. These changes are as follows

- All taxpayers excluding small taxpayers and a few exceptions like ISD etc. will file one monthly return. The return is simple with two main tables. One for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer for availing input tax credit.

- Taxpayers would have facility to create his profile based on nature of supplies made and received. The fields of information which a taxpayer would be shown and would be required to fill in the return would depend on his profile.

- NIL return filers (no purchase and no sale) will be given facility to file return by sending SMS.

The Council also gave its nod to quarterly filing of return for the small taxpayers having turnover below Rs. 5 Cr as an optional facility. 93% of the taxpayers have a turnover of less than Rs 5 Cr and these taxpayers would benefit substantially from the simplification measures proposed improving their ease of doing business Quarterly return will be similar to main return with monthly payment facility but for two kinds of registered persons – small traders making only B2C (business to consumers) supply or making B2B (business to business) + B2C supply. For such taxpayers, simplified returns have been designed called Sahaj and Sugam. In these returns details of information required to be filled is lesser than that in the regular return.

The new return design provides facility for amendment of invoice and also other details filed in the return. Amendment will be carried out by filing of a return called amendment return. Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayers.

Bipin Sapra, Tax Partner at EY India said that the simplification of return and allowing traders below 5 Crore turnover to file quarterly returns will positively reduce compliance. “The difference in timing of returns for above and below 5 Crore turnover assessees may, however, impact timing of availing credit,“ he said