NEW DELHI: The 39th GST Council on Saturday decided to increase Goods and Services Tax (GST) rates on mobile phones and some specified parts to 18 per cent from the previous 12 per cent, in a bid to correct anomalies in the duty structure. The council also decided to slash GST on maintenance repair overhaul services for aircraft to 5 per cent from 12 per cent, while the tax rate on handmade and machine- made matchsticks have been rationalised to 12 per cent.
All these changes will come with effect from April 1, Union Finance Minister Nirmala Sitharaman said. Mobile parts were being taxed at the same rate as the finished products, which meant that mobile manufacturers were often unable to get their full tax offsets. Officials said this anomaly has now been corrected. “GST increase for phones from 12 per cent to 18 per cent will crumble the industry. Smartphone industry is already struggling with profitability issues due to depreciating rupee value. Everyone will be forced to increase prices.
This will further weaken mobile industry’s #MakeInIndia programme,” Xiaomi India MD Manu Jain tweeted. Apart from mobile phones, items such as footwear, fertilisers and man-made fibres were discussed as facing inverted duty structures. However, a decision on GST rate hike on these items was deferred for the next meeting. Small businesses got some relief from the latest GST Council meeting, with the deadline for GSTR-9C being relaxed. For those with annual turnover below Rs 5 crore, the due date for filing annual returns and reconciliation statement for FY19 was extended to June 30, 2020.
The council also waived late fee for delayed filing of annual returns for FY18 and FY19 by entities with turnover of less than Rs 2 crore. The minister also said that interest will be levied on net tax liability from July 1 for delayed GST payments. Infosys chairman Nandan Nilekani made a detailed presentation to the GST Council and proposed a roadmap towards overhauling of GST Network to address all glitches by January 2021.
However, the council has decided to give it time till July 2020, while agreeing to its demand to deploy more skilled manpower and increase capacity of hardware. Sitharaman said the GST Council would hold a separate meeting to discuss the delay in payment of compensation cess to states. Adding that the Central government had given GST compensation worth Rs 1.2 lakh crore to the states, Sitharaman said that the Centre would first seek a legal opinion on borrowing and subsequent repayment of funds by the member states.