Infosys told to improve GSTN design by July

Mobile phones are likely to get costlier, with the Goods and Services Tax (GST) Council on Saturday deciding to increase the rate on mobile phones and specific parts to 18% from the current 12%, from April 1.

Also read: Don’t hike GST on mobiles, govt. urged

Union Finance Minister Nirmala Sitharaman said the decision was taken not to increase the prices but to correct the inverted structure of duty on some products wherein the rate of tax paid on inputs purchased is more than the rate of tax on finished products on outward supplies.

“There was a presentation by the Fitment Committee to look at the problem of inverted tax structure...,” the Minister said.

Pankaj Mohindroo, chairman at India Cellular & Electronics Association, said the move to increase GST by 6% would be detrimental to the vision of Digital India. “Consumption will be stymied and our domestic consumption target of ₹6 lakh crores by 2025 will fall short by at least ₹2 lakh crores,” he said.

In a letter to the Finance Minister earlier this week, Mr. Mahindroo said that instead of rationalising the GST on components and inputs, the “bizzare” move to increase the rate on the final product was not in the interest of consumers as well as the industry.

Also read: GST on cellphones, fertilizers, man-made fabrics, garments may be hiked to 18%

On the calibration of rates for other items where similar problems arise, such as footwear, textiles and fertilizers, Ms. Sitharaman said that after a detailed discussion it was decided to take up the matter at future meetings.

The GST rate on maintenance, repair and overhaul (MRO) services in respect of aircraft has been reduced from 18% to 5% with a full input tax credit. “This change is likely to assist in setting up of MRO services in India,” she said at a press conference after the meeting.

On the glitches in the GST Network (GSTN), the backbone of the GST system built and managed by Infosys, the Minister said the company had been given a deadline of July 31, 2020, to implement all the initiatives discussed for the smooth running of the system, instead of the January, 2021 deadline sought by Infosys chairman Nandan Nilekani. Mr. Nilekani also made a presentation before the Council on addressing the issues. The GST Council has asked that Mr. Nilekani attend the next three meetings and update it of the status of implementation.