Labelling of millet-based health products to dictate 5% or nil GST

Issue of tax treatment of MUVs may be deferred at Feb 18 GST Council meet

The all-powerful Goods and Services Tax (GST) Council, scheduled to meet on Saturday, will take up changes to tax rates on some items, including millet-based health mix. A committee of officials has recommended a revision, according to the agenda document reviewed by Business Standard.

However, the GST Council may defer the issue of tax treatment of multi-utility vehicles (MUVs), whether they would be taxed on a par with sport utility vehicles (SUVs) that currently attract a 22 per cent compensation cess.

The fitment panel, which comprises tax officers from the Centre and states, recommended a reduction of rates on millet-based health products, from the current 18 per cent to nil or 5 per cent (depending on packaging).

The tax rate is to be nil if the millet product comprising at least 70 per cent of millet is sold loose and 5 per cent if sold packaged/labelled, suggested the panel. The move is aimed at spurring demand for millet products, which, in turn, will increase the income of farmers growing such crops. The panel also suggested these goods be appropriately classified.

On the issue of MUVs, the fitment panel has proposed to defer the matter, seeking a detailed study and consultation with all stakeholders. The Council, at its December 17 meeting, had approved an increase in the rate of compensation cess to 22 per cent, from the earlier 15 per cent on SUVs. 

However, confusion prevails on the specification and tax treatment of SUVs and whether a certain category of passenger cars will also attract a higher tax rate, even if not termed SUV.

Besides, the fitment panel also suggested a rate reduction on pencil sharpeners to 12 per cent, from the current 18 per cent, while treating rab (liquid jaggery) on a par with jaggery and levying nil tax, if sold loose and 5 per cent, if packaged/labelled.

Other key agenda

The GST Council agenda is likely to take up two important state panel reports.

One, setting up a GST appellate tribunal; two, capacity-based taxation on evasion-prone commodities, such as paan, gutka, etc.

On setting up a tribunal for resolving GST-related cases, a group of ministers (GoM), led by Deputy Chief Minister of Haryana Dushyant Chautala, recommended that states have Benches as much as required, depending on size of state.

It suggested having one judicial member and one technical member. They could be either from the Centre or state in a 50:50 ratio in every state.

Also, the single-member Bench should be empowered to hear cases with tax implications up to Rs 50 lakh. States with a population less than 50 million should have a maximum of two Benches and no state should have more than five Benches.

Another GoM on capacity-based taxation will also be tabled at the Council meeting, according to the agenda.

The panel has proposed strict measures to curb evasion on paan masala, chewing tobacco and similar products. However, it said that a capacity-based levy may not be prescribed as it may not be in the spirit of the GST levy and may not be permissible in terms of the constitutional mandate in the GST.

The report suggested that the compensation cess levied on such evasion-prone commodities shall be changed from the current ad valorem tax to a specific tax-based levy to boost the first stage (manufacturer level) collection of revenue.

Besides, efforts shall be made for the implementation of a track-and-trace mechanism for all tobacco products, preferably by the end of the 2023, while carrying out the associated infrastructural, systemic and legal feasibility studies to implement the same.

The fine print

Issues on the table

• State panel report on constitution of GST appellate tribunal
• GoM report on capacity-based taxation for paan masala, gutka

Deferred

• Issue of levying compensation cess of 22% on MUVs

Proposed rate changes

• Rab (liquid jaggery), millet-based health mix: From 18% to nil or 5%
• Pencil sharpener: From 18% to 12%