NEW DELHI: The finance ministry is in a fix, as ahead of the next GST Council meeting on September 20, the fitment committee has advised against any move to cut the GST rate on automobiles and auto components as it would cause loss of revenue to the tune of Rs 50,000 crore to the government.“Items like auto components and cement are revenue generators for the government. As per a rough estimate, any move for a rate cut will result in revenue loss to the tune of Rs 50,000 crore.
Currently, the collection is not very comfortable. It is up to the policymakers to decide how much revenue loss they can afford to boost the sector,” a member of the fitment committee said.
According to the committee, the total revenue from India’s auto industry is close to Rs 3 lakh crore annually.
The next GST Council meeting will take place on September 20, 2019, and the decision to bring down GST rates on automobiles from 28 per cent to 18 per cent will be taken then.
The GST Fitment Committee met on Friday to discuss the appeal from the auto industry to bring the GST rate down from 28 per cent to 18 per cent to help the industry, which is facing its worst slowdown this decade.
“One of the suggestions was the reduction of GST rate for the automobile sector, that of course... will have to go to the (GST) Council,” Finance Minister Nirmala Sitharaman had said while announcing the financial package to address the slowdown.
However, with the GST collection weak, the revenue department is not happy with the proposal for a rate cut. The gross goods and services tax (GST) collection in August 2019 had slipped to Rs 98,202 crore.
Some states, including Kerala, had also expressed reservations about this move.Kerala Finance Minister Thomas Issac took to Twitter to propose that rather than cutting GST, the government consider reducing cess.
“It is not a high GST rate that has caused auto crisis. Pre GST combined tax excluding Service Tax ranged between 32 per cent to 54 per cent. Now tax including Compensation Cess ranges from 29 per cent to 46 per cent only. If Centre is keen to reduce it further, abolish Cess. The rate would come down to 28 per cent,” Issac tweeted.