The fitment committee is of the view that a rate cut would lead to a revenue shortfall, denting the collections of both the Centre and the states
The fitment committee under the Goods & Services Tax (GST) Council has rejected the demands for a tax rate cut on cars and biscuits, while recommending tax relief for the hotel industry. The GST Council is scheduled to meet on Friday in Goa.
The fitment committee, which comprises revenue officials of both Centre and states, is of the view that a rate cut would lead to a revenue shortfall, denting the collections of both the Centre and the states.
The auto sector has been demanding a reduction in the GST rates from 28% to 18% to revive the falling sales. The fitment committee has rejected the proposal, citing revenue considerations.
REVENUE IN MIND
|
- The fitment committee is of the view that a rate cut would lead to a revenue shortfall, denting the collections of both the Centre and the states
- The panel has also rejected a proposal of the telecom ministry to lower the GST rate to 12% from the current 18%
|
Auto sales generate taxes to the tune of Rs 55,000-60,000 crore per annum.
Meanwhile, the committee has also rejected a proposal of the telecom ministry to lower the GST rate to 12% from the current 18%. Similarly, the committee has also not favoured reduction of GST rate on cruise tickets which is taxed at 18%.
For the hotel industry, the fitment committee has recommended a rate cut from 28% to 18% on hotel tariffs of Rs 7,500 and above. The other option is to raise the tariff slab of Rs 7,500 and above to Rs 12,000 per night. The hotel tariffs starting Rs 7,500 attract a tax rate of 28%, while lower tariffs are taxed at 18%.
The committee has also decided to leave the current GST rate structure untouched for a number of items including biscuits, bakery products, ready-to-eat food items, breakfast cereals, mineral water among other things.
The GST Council will take the final call on the recommendations made by the fitment committee.
The Gross Domestic Product growth has hit a six-year low of 5% for the first quarter of 2019-20. The Centre has announced a number of measures to revive the key sectors of the economy, including auto and real estate, in the past one month.
Even as there is a clamour to reduce GST rates on various products, revenue considerations are unlikely to see the states agreeing to forgo their share of revenue on account of reduced collections due to a rate cut. The states are members of the GST Council, which is chaired by the finance minister.
States are aware that it would not be in their favour to allow GST rate cut at this stage. They are likely to consider the implications of a rate rationalisation proposal, given the fact that the compensation cess fund, which is utilised to compensate states, has turned negative.
As per the GST Act, the Centre compensates the states for any revenue shortfall on account of lower tax collections. It has made a commitment to the states to compensate for five years if their annual GST revenue growth was less than 14%
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Auto sector")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}