Union Finance Minister Nirmala Sitharaman on July 19 said that states levied sales tax or VAT on food grains in the pre-GST regime and the current duty on cereals, pulses, flour, curd and lassi is an exercise to prevent tax leakage.
Union Finance Minister Nirmala Sitharaman on July 19 said that states levied sales tax or VAT on food grains in the pre-GST regime and the current duty on cereals, pulses, flour, curd and lassi is an exercise to prevent tax leakage.
GST was levied on pre-packaged goods/food packets A top government official said some states had reacted by losing revenue earned before levying VAT on food items.
The decision to impose tax, which came into effect from July 18, is not of the Central Government but of the GST Council. It was considered by the fitment committee which has officials from some states and the centre.
It was also recommended by a Group of Ministers (GoM) by the Ministerial Representatives of some states and finally by the GST Council, Revenue Secretary Tarun Bajaj informed. PTI,
Read also: explained | What is the controversy over the imposition of GST on food?
Overall, the GST Council, the new constitutional mechanism in the country to decide on GST, took a consensus view on levying the tax, he said.
He said the panel, which is headed by the Union Finance Minister and includes representatives from all states and union territories, takes a decision on their involvement.
However, no GST on pulses, wheat, rye, oats, maize, rice, atta, semolina, gram flour, puffed rice and curd/lassi when sold in the open and not pre-packaged or pre-labelled It will take
The remarks came against the backdrop of the Congress-led opposition parties stalling the functioning of Parliament in the first week of the monsoon session over the imposition of GST on items of daily use and other issues.
While states ruled by non-BJP parties were in favor of the decision on levying the tax at the council meeting in Chandigarh last month, strong protests against the levy came as Parliament’s monsoon session was about to begin.
“Before GST Implementation” [on July 1, 2017] During the VAT regime, it [tax on essentials] was in many states. States were getting revenue [from levying VAT on food items], This new goods and services tax once in 2017 [GST] The rule came, it was envisaged that it would continue but it was imposed only on branded products when the rules and circulars came out,” Mr Bajaj said.
The rules state that GST will not be levied on pre-packaged goods if the brand gives up actionable claims on the brand. Due to this some well known brands started selling these items in packets which had their brand on it but there was no actionable claim on it and hence did not attract 5% GST.
“I do not want to be named, but very famous brands in the country were not paying taxes by using this particular loophole. And it was creating an arbitrage because in an FMCG product like pulses or rice, which is different, 5% is a huge margin,” he said.
Naturally, companies selling products under the brand complained.
“The states also gave us feedback that before the introduction of GST, we used to get a lot of money and we should do something,” he said.
However, he did not name the states.
Eliminating the distinction between branded and non-branded products was also an exercise to simplify the tax regime and create a level playing field with minimum potential for legal challenges. He said it gives equality to all brands and companies by removing any disparity.
“Hence, people were misusing it. Secondly, states gave us feedback that they were losing revenue on this and not getting the revenue that they used to get in the pre-GST regime,” he said.
“So the fitment committee [composed of Central and State officials] Sit down, take feedback. then group of ministers [from different States] Sit down, take feedback. After that the council discussed it. So it was a deliberate decision… it was a unanimous decision… it was a unanimous decision.”
Mr Bajaj said that the GST Council is working with full understanding of the issues and taking decisions to address the concerns of even a single dissatisfied state.
“I have seen so many decisions that we didn’t take it forward in one sitting because there was a state concern. The approach is that either we will address the concern or not take it forward,” he said.
Union Finance Minister Nirmala Sitharaman on July 19 said that states have levied sales tax or VAT on food grains in the pre-goods and services tax. [GST] The existing levy on cereals, pulses, flour, curd and lassi is an exercise to check the tax leakages.
The fitment committee, which first investigated the issue, included officials from Rajasthan, West Bengal, Tamil Nadu, Bihar, Uttar Pradesh, Karnataka, Maharashtra, Haryana and Gujarat.
Its recommendations were examined by a group of ministers made up of members from West Bengal, Rajasthan, Kerala, Uttar Pradesh, Goa and Bihar and chaired by the Chief Minister of Karnataka.
The GoM’s recommendation was placed before the GST Council, the highest decision-making body of the new tax regime, in a meeting held in Chandigarh last month.