GST panel unlikely to approve tax rate cut for auto sector: Report

India's goods and services tax (GST) panel is unlikely to approve lowering the tax for the auto and allied components sector this week, as a study has warned of major revenue losses, two government officials said.

The Indian auto sector has been reeling from the worst slump in nearly two decades.
The Indian auto sector has been reeling from the worst slump in nearly two decades.

A government study, attached to the agenda of a Sept. 20 GST panel meeting, has said the total annual revenue loss could be as much as 500 billion rupees ($6.95 billion), if the panel decided to lower tax rates for the auto sector to 18% from 28%.

Meanwhile, state officials in Kerala, Punjab and West Bengal say they are also opposed to any cut in tax rates in the autos sector, or even consumer goods, because of lacklustre tax collections this fiscal year.

Also check these Vehicles

Find more Cars
Mahindra Ekuv100 (HT Auto photo)
₹ 8.25 - 10 Lakhs* *Expected Price
View Details
Mahindra S204 (HT Auto photo)
₹ 12 Lakhs *Expected Price
View Details
Rolls-royce New Ghost (HT Auto photo)
₹ 6.95 - 7.95 Cr* *Expected Price
View Details
Ferrari Purosanguesuv (HT Auto photo)
₹ 3 - 3.35 Cr* *Expected Price
View Details
Tata Safari 2023 (HT Auto photo)
₹ 16 - 24 Lakhs* *Expected Price
View Details
Mg 4 Ev (HT Auto photo)
₹ 30 - 32 Lakhs* *Expected Price
View Details

In the April-July period, total tax revenues of 20 Indian states fell 7% to 4.9 trillion rupees compared with the same period last year.

Some states were particularly hard hit, with data showing Andhra Pradesh, Rajasthan and Punjab tax collections plunged 59%, 35.5% and 12.5%, respectively.

"I will oppose any reduction for the simple reason that it won't be revenue neutral," said Thomas Isaac, finance minister of the southern state of Kerala.

The auto sector, which has been reeling from the worst slump in nearly two decades, has pushed for a lowering of tax rates at the Sept. 20 GST panel meeting, in a bid to revive vehicle demand.

The GST panel is chaired by the federal finance minister and all state finance ministers are members. The panel makes decisions by vote.

Still, those states ruled by Prime Minister Narendra Modi's Bharatiya Janata Party may be willing to support a GST cut if the federal government pushes such a proposal.

"In my view, if the centre feels that it is good for the economy, and they will be able to compensate the states, then the states should support the proposal," said Himanta Biswa Sarma, the finance minister of the northeastern state of Assam.

The GST meeting will be closely watched as it could help investors gauge the government's seriousness in reviving growth in Asia's third-largest economy.

Finance Minister Nirmala Sitharaman has in recent weeks outlined a slew of measures to revive investor sentiment and push growth up from a 25-quarter low of 5% in April-June.

But measures such as creating a stressed fund for the hard-hit housing sector, a withdrawal of higher taxes on foreign portfolio investors and planned mergers among state-owned banks have not really helped revive investor sentiment.

Weak growth has also hit the federal government's direct tax collections, which are showing a 6% growth rate, considerably less than the budgeted 17% growth rate for this fiscal year, while GST collections in August fell to a six-month low.

This, in turn, could make it challenging for the government to meet its fiscal deficit target of 3.3% for 2019/20.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)

First Published Date: 17 Sep 2019, 17:17 PM IST
Shopping Bag Shop Now
1% OFF
Godrej aer O – Hanging Car Air Freshener | Car Accessories | Cool Aqua (7.5g)
Rs. 98 Rs. 99
70% OFF
VENO Portable High Power 2 in 1 Car Vacuum Cleaner | USB Rechargeable Wireless Handheld Car Vacuum Cleaner Traveling, Camping Reusable and Sustainable (2 in 1 Vacuum Cleaner)
Rs. 899 Rs. 2,999
65% OFF
Ambrane 38W Fast Car Charger with Dual Output, Quick Charge 3.0 and Power Delivery, Type-C & USB Port, Wide Compatibility for Smart Phones (RAAP C38 A, Black)
Rs. 349 Rs. 999
4% OFF
Godrej aer O – Hanging Car Air Freshener | Car Accessories | Musk After Smoke (7.5g)
Rs. 95 Rs. 99

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.