Cement rate cut to 18% on the agenda of GST meet

Cutting the rate from 28% will cause the government a loss of Rs 13,000 crore annually

The GST Council will consider a proposal to slash the tax on cement to 18 per cent from 28 per cent at its meeting next week along with a ministerial panel report that proposes a cut in rates in under-construction properties, including affordable homes.

A rate cut in cement to 18 per cent will lead to a loss of Rs 13,000 crore annually to the government.

The Narendra Modi-government is keen to ensure the GST cut actually benefits the end users in terms of lower prices as the Lok Sabha elections loom.

Officials said the GST cut in cement and the panel report were on the agenda of the GST Council meeting on February 20. The Cement Manufacturers Association had been pitching for a cut in the GST to 18 per cent as it would boost infrastructure spending and create jobs, while reducing the costs of buying a house.

While cutting the rates, the council could come out with some guidelines to ensure the manufacturers pass on the benefits of the rate cut to consumers, officials said.

Union minister Arun Jaitley had in a Facebook post said lowering the tax rate on cement was a priority. Cement is the only commodity used by the common man that is taxed at the highest slab.

“Since the government and its agencies are one of the largest consumers of cement, the necessity of passing on GST rate cuts, whenever the rate reduction takes place, could result in some guidelines being issued as part of the rate reduction process,”.

Analysts said cement roughly accounts for a fifth of construction costs, and a 10 percentage point reduction in the tax burden will bring significant relief to buyers. A cut in the GST rate would boost demand and increase revenue collection.

Housing proposals

The council will also consider a report by a group of ministers (GoM) under Gujarat deputy chief minister Nitin Patel that has proposed a reduction in the rates for under-construction homes to 5 per cent from 12 per cent and in affordable housing to 3 per cent from 8 per cent — but without input tax credit.

Analysts said the margin in affordable housing is so low that builders were unlikely to pass on the GST benefits in the absence of input tax credit.

In the non-affordable segment, the builders are likely to pass on the benefits as the margins per square feet are high. Construction is a labour-intensive sector that contributes 8 per cent to the gross domestic product.

After a marginal growth of 1.3 per cent in 2016-17, construction activity had picked up pace to grow at 6 per cent in 2017-18.

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Complaince under GST

A Compliance audit involves verifying that the GST has been properly accounted for in your business transactions, and to ensure that the information is correctly reported in your GST Returns. This includes checking if your supplies are classified correctly, if GST was properly charged and accounted for, if input tax was claimed correctly, and if the values of supplies, purchases and taxes reported are complete. Compliance audit shall demonstrate the organisation’s process of recording transactions into computer system is correct.

The primary purpose of compliance audit is to ensure that organizations are well aware and fully compliant with the GST laws and regulations. Compliance audit will be “advisory” in nature to facilitate the businesses to understand their compliance requirements.

Some of the critical GST compliance requirements are listed below:

Under GST a tax invoice is an important document. It not only evidences supply of goods or services, but is also an essential document for the recipient to avail Input Tax Credit (ITC). A registered person cannot avail input tax credit unless he is in possession of a tax invoice or a debit note.

Schedule II of the CGST Act, 2017 lists a few activities which are to be treated as supply of goods or supply of services. For instance, any transfer of title to goods would be a supply of goods, whereas any transfer of right in goods without transfer of title would be considered as services.

GST is essentially a tax only on commercial transactions. Hence only those supplies that are in the course or furtherance of business qualify as Supply under GST. Hence any supplies made by an individual in his personal capacity do not come under the ambit of GST unless they fall within the definition of business as defined in the Act.

A supplier cannot take ITC of GST paid on goods or services used to make supplies on which recipient is liable to pay tax. – Any amount payable under reverse charge shall be paid by debiting the electronic cash ledger. In other words, reverse charge liability cannot be discharged by using input tax credit. However, after discharging reverse charge liability, credit of the same can be taken by the recipient, if he is otherwise eligible.

Section 35 of the CGST Act, 2017 provides that every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of…

• a. production or manufacture of goods;
• b. inward and outward supply of goods or services or both;
• c. stock of goods;
• d. input tax credit availed;
• e. output tax payable and paid; and
• f. such other particulars as may be prescribed.

In addition, the rules also provide that the registered person shall keep and maintain records of –

• a) goods or services imported or exported; or
• b) supplies attracting payment of tax on reverse charge

along with relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills.

monthly production accounts, showing the quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof;

accounts showing the quantitative details of goods used in the provision of services, details of input services utilized and the services supplied;

Separate accounts for works contract showing –

• the names and addresses of the persons on whose behalf the works contract is executed;
• description, value and quantity (wherever applicable) of goods or services received for the execution of works contract;
• description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract;
• the details of payment received in respect of each works contract; and
• the names and addresses of suppliers from whom he has received goods or services.
• Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter correct entry shall be recorded, and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained. Further each volume of books of account maintained manually by the registered person shall be serially numbered.
• Monthly reconciliation of Supplies as per Eway bill and GSTR 1.
• E-way bill is to be issued irrespective of whether the movement of goods is caused by reasons of supply or otherwise. In respect of transportation for reasons other than supply, movement could be in view of export/import, job work, SKD or CKD, recipient not known, line sales, sales returns, exhibition or fairs, for own use, sale on approval basis etc.

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GST on Education Services

Education is defined as “Education is a process of training and developing the knowledge, skill and character of students by normal schooling.”

Taxation of education services is a sensitive issue as it is the basic right of every person to get an education and levying GST on it have a major impact on the society. However, education is also getting commercialized day by day.

Classification of Education Services

Heading & Group	Service Code (Tariff)	Service Description
Heading no. 9992		Education services
Group 99921	999210	Pre-primary education services
Group 99922		Primary education services
	999220	Primary education services
Group 99923		Secondary Education Services
	999231	Secondary Education Services, General
	999232	Secondary Education Services, Technical and Vocational
Group 99924		Higher Education Services
	999241	Higher Education Services, General
	999242	Higher Education Services, Technical
	999243	Higher Education Services, Vocational
	999249	Other higher education services
Group 99925		Specialised education services
	999259	Specialised education services
Group 99929		Other education & training services and educational support services
	999291	Cultural education services
	999292	Sports and recreation education services
	999293	Commercial training and coaching services
	999294	Other education and training services
	999295	services involving conduct of examination for admission to educational institutions
	999299	Other Educational support services

 

Rate of GST

The rates of GST on education services (as per Notification No. 11/2017-Central Tax (Rate), Notification No. 11/2017-Central Tax (Rate) and Notification No. 12/2017-Central Tax (Rate) all dated 28.06.2017 as amended) are as below:

Chapter/ Section/ Heading	Description of Service	Rate / Notification
9992	Education Services	18% ( 9% Central Tax + 9% State Tax)/ Serial No. 30 of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017
9992	Services provided – (a) by an educational institution to its students, faculty and staff; (b) to an educational institution, by way of, – (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; (iii) security or cleaning or housekeeping services performed in such educational institution; (iv) A services relating to admission to, or conduct of examination by, such institution; up to higher secondary: Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent	NIL/Serial No. 66 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
9992	Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme: – (a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management.	NIL / Serial No. 67 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
90 or any chapter	Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, Braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blind Braille instruments, paper etc.	5%/ Serial No. 257 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017
9023	Instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses	28 %/ Serial No. 191 of Schedule IV of the Notification No. 1/2017-Central Tax (Rate) dated 28th June, 2017

 

Thus services provided by an educational institution to students, faculty and staff are exempt. Educational Institution means an institution providing services by way of:

• Pre-school education and education up to higher secondary school or equivalent.
• Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force. The service should be delivered as part of the curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered. Training given by private coaching institutes would not be covered as such training does not lead to the grant of a recognized qualification.
• Education as a part of an approved vocational education course.

Services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country is not covered above and thus not exempted under GST.

Notification No. 12/2017 – Central Tax (Rate) dated 28th June 2017, defines approved vocational education course as under: An “approved vocational education course” means: –

• A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961).
• A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship.

Private coaching centres or other unrecognized institutions, though self-styled as educational institutions, would not be treated as educational institutions under GST and thus cannot avail exemptions available to an educational institution.

Related Services

Output services of lodging/boarding in hostels provided by such educational institutions which are providing pre-school education and education up to higher secondary school or equivalent or education leading to a qualification recognised by law, are fully exempt from GST.

Input Tax Credit

Regarding, input services, it may be noted that where output services are exempted, the Educational institutions may not be able to avail credit of tax paid on the input side.

Place of Supply

The place of supply will be the place where such service is provided.

Place of supply of services provided by way of organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or services ancillary to organisation of any of the events or services, or assigning of sponsorship to such events: –

• To a registered person, shall be the location of such person.
• To a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient.

Educational Institution run by charitable organizations

If trusts are running schools, colleges or any other educational institutions or performing activities related to advancement of educational programmes specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years residing in a rural area, activities will be considered as charitable and income from such services will be wholly exempt from GST in terms of Notification No. 12/2017 – Central Tax (Rate) dated 28th June 2017.

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Residential Properties: GoM favours cut in GST to 5% from effective rate of 12%

New Delhi, Feb 8 (IANS) A ministerial panel set up to look into GST-related issues of the real estate sector on Friday indicated that it would recommend taxing under-construction residential properties at 5 per cent, down from 12 per cent currently.

Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under construction property or ready to move in flats where the completion certificate has not been issued at the time of sale.

A Group of Ministers (GoM) formed to analyse tax rates and issues being faced by the real estate sector under the goods and services tax (GST) regime has favoured reducing GST rate on under-construction residential properties to 5 per cent without input tax credit from current effective rate of 12 per cent, after abatement of value of land. The panel is also leaning in favour of a lower rate for affordable housing at 3 per cent from 8 per cent at present, a government official said.

The seven-member GoM, headed by Gujarat Deputy Chief Minister Nitin Patel, will finalise its recommendations in 1-2 days and then submit its recommendations to the GST Council, which will take the final decision on the proposal. “The industry players have asked for a higher rate with input tax credit but the ministers felt that the benefits of input tax credit don’t get passed on to homebuyers. That’s why like in the case of restaurants, the GoM has favoured lowering the GST rates on residential houses to 5 per cent without input tax credit and to 3 per cent for affordable housing,” the official said.

Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under construction property or ready to move in flats where the completion certificate has not been issued at the time of sale.

The effective pre-GST tax incidence on such housing property was 15-18 per cent. GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. There have been complaints that builders are not passing on the ITC benefit to consumers by way of reduction in price of the property after the rollout of the GST.

We want to ensure lower tax rates for housing for the middle class and homebuyers, Gujarat’s Deputy Chief Minister Nitin Patel told reporters after the meeting. Tax experts, however, said this may lead to breaking of inputs tax credit chain as some inputs such as cement are taxed at a much higher rate of 28 per cent.

Pratik Jain, Leader, Indirect Tax, PwC India said, “While the intention of the government is to provide relief to the end customer, from a structural standpoint, it should be ensured that the chain of GST credit is not broken. Perhaps a better approach would be to reduce prevailing GST rate on residential property, say bringing the effective tax rate down to 8 per cent from 12 per cent, while continuing the benefit of input tax credit.”

“For real estate properties where the cumulative impact of  tax cost on account of denial in credits and 5 per cent output GST rate is lesser than the current 12 per cent rate, this rate cut would be quite positive.  But where the cumulative cost is higher than 12 per cent, this rate reduction could entail an increased tax cost.”

The GST Council, headed by the Union Finance Minister and comprising his State counterparts, on January 10 decided to set up the GoM. The other Ministers in the seven-member GoM are the Finance Ministers of Maharashtra Sudhir Mungantiwar, Karnataka’s Krishna Byre Gowda, Kerala’s Thomas Isaac, Punjab’s Manpreet Singh Badal, Uttar Pradesh’s Rajesh Agarwal and Goa Panchayat Minister Mauvin Godinho.

The Group of Ministers headed by Gujarat Deputy Chief Minister Nitin Patel also favoured 3 per cent tax on the affordable housing category, down from 8 per cent. However, claiming input tax credit would no longer be possible on such transactions, an official said after the meeting of the GoM.

The panel set up by the Goods and Services Tax (GST) Council is expected to finalise its report in a week’s time and table it in the next meeting of the Council for final approval.

GST is currently levied at 12 per cent on premium housing and 8 per cent on affordable housing on payments made for under-construction properties where completion certificate has not been issued at the time of sale. No GST is charged if a property is bought after the issue of completion certificate.

The government had last month constituted a seven-member GoM to look into GST-related issues of the real estate sector. Its agenda was to analyse the tax rate of GST on the under-construction residential properties for boosting the realty segment.

There had been demand from many quarters to slash the rate on the segment to 5 per cent from the current 12 per cent.

Other members of the GoM are finance ministers of five states — Sudhir Mungantiwar of Maharashtra, Krishna Byre Gowda of Kerala, T.M. Thomas Isaac of Karnataka, Manpreet Singh Badal of Punjab and Rajesh Agarwal of Uttar Pradesh. Goa’s Panchayat Minister Mauvin Godinho is also a member. — IANS

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