GST rate on mobile phones will be hiked to 18 per cent while that on maintenance repair overhaul (MRO) services for aircraft will be lowered to 5 per cent with effect on April 1, Finance Minister Nirmala Sitharaman said on Saturday.
Briefing reporters after the 39th GST Council meeting, she said Infosys Chairman Nandan Nilekani made a detailed presentation for the transition into a better GST Network system and the requirement of hardware to enhance capacity for addressing the system related issues that are being faced by taxpayers in the IT system.
Demand for more skilled manpower, better hardware to enhance capacity has been agreed to by the Council, she said.
The GST Council has decided that a completely enhanced capacity, a leaner system of GST Network with capacity enhance, staff response, better solutions, which were envisaged and proposed by Nilekani by January 2021, should be completed by July 2020, Sitharaman said.
With regard to GST rates, the minister said there are four sectors -- footwear, textiles, fertiliser and mobile phones-- which face inverted duty structure wherein inputs are taxed at a higher rate than finished products.
"It was decided by the Council to raise the GST rate on mobile phones and specified parts which presently attract 12 per cent to be taxed at 18 per cent.
"For all other items where there is duty inversion, if there is a need to calibrate the rates for removing inversion, it was decided in one of the future meetings we will take up the issue," she said.
Well, this move did not go well with the giants in the industry. Manu Kumar Jain Global Vice President Xiaomi and Managing Director of Xiaomi India took to Twitter and said, "GST ncrease for phones from 12% to 18% will crumble the industry. Smartphone industry is already struggling with profitability due to depreciating INR vs US$. Everyone will be forced to increase prices. This will further weaken mobile industry's 'Make In India' program."
Counterpoint Research Associate Director Tarun Pathak said, "This will impact the pricing and especially at a time when we are staring at uncertainty in the larger electronics supply chain due to coronavirus. An increase in price means a section of users will either go for second hand or even turn to grey market".
The GST rate on handmade and machine-made matchsticks has been rationalised to 12 per cent from 5 per cent and 18 per cent respectively.
The GST rate on Maintenance, Repair and Overhaul (MRO) services in respect of aircraft would be reduced from 18 per cent to 5 per cent with full Input Tax Credit and change the place of supply for B2B MRO services to the location of recipient.
"This change is likely to assist in setting up of MRO services in India," Sitharaman said.
The Council, chaired by Finance Minister, also deferred implementation of e-invoice and QR Code to October 1, 2020, from an earlier timeline of April 1.
Also, the rollout of the e-wallet scheme for exporters too has been extended to March 31, 2021.
The Council also decided that the interest for delay in payment of GST would be charged on the net cash tax liability with effect from July 1, 2017, and the law would be amended retrospectively.
For GST registrations which have been cancelled till March 14, 2020, application for revocation of cancellation of registration can be filled up to June 30, 2020, as a one-time measure to facilitate those who want to conduct business.
The Council also relaxed the requirement of MSMEs from the furnishing of Reconciliation Statement in Form GSTR-9C, for 2018-19, for taxpayers having aggregate turnover of below Rs 5 crore.
It also decided to extend the due date for filing the annual return and the reconciliation statement for 2018-19 to June 30, 2020.
For businesses with aggregate turnover of less than Rs 2 crore, late fees would not be levied for delayed filing of the Annual Return and the Reconciliation Statement for 2017-18 and 2018-19.
The Council also approved a new facility called 'Know Your Supplier' to be introduced so as to enable every registered person to have some basic information about the suppliers with whom they conduct or propose to conduct business.