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Business News/ Politics / Policy/  Businesses in 28% GST slab lobby for rate cuts
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Businesses in 28% GST slab lobby for rate cuts

With revenue from the new indirect tax system in the process of stabilizing, GST Counci is not in favour of tax rate changes, except for minor tweaks

GST collections in May stood at Rs94,016 crore. Photo: PTIPremium
GST collections in May stood at Rs94,016 crore. Photo: PTI

New Delhi: Businesses in the highest goods and services tax (GST) slab of 28%, such as producers of cement, paint and digital cameras, are lobbying for a tax rate cut.

With revenue from the new indirect tax system in the process of stabilizing, GST Council, the federal tax policy-making body, is not in favour of tax rate changes, except for minor tweaks.

The council’s next meeting is likely to be scheduled after Parliament decides the dates of the monsoon session, where the government intends to take up a host of amendments to GST laws to facilitate the simplified return filing process and provide clarifications. The changes may also provide for a centralized Authority for Advance Rulings.

After the last major revision of the 28% slab in November last year, only 50 items remain in the highest slab. These include refrigerators, air conditioners, cement, paint, digital cameras, automobiles and their parts, sugary drinks and tobacco.

Facing intense competition from smartphones, digital camera makers Canon India Pvt Ltd, Sony India Pvt Ltd and Nikon India Pvt Ltd recently sought a GST reduction to 18% from the current 28%, saying the high tax burden might cause the industry’s premature end in the context of the Indian economy, according to a submission made by the producers that Mint has reviewed.

Manufacturers of alcohol, which falls outside GST, are lobbying for including at least extra neutral alcohol (ENA), a highly concentrated form of spirit not fit for direct human consumption, within GST. Some cottage industry items are under consideration for a GST rate cut.

“Industry will always seek tax rate reductions and simplification of procedures, but we have to keep in mind that tax compliance is low in our society," a government official privy to the discussions in the GST Council said on condition of anonymity.

The government’s reluctance to cut tax rates are because of two reasons. First, frequent changes may cause difficulties in administration. Second, tax revenue from GST meeting the 7.4 trillion target for this financial year is crucial for achieving the 3.3% fiscal deficit target for FY19.

The industry argues that lower tax rate could increase sales volumes and make up for loss of revenue due to a rate cut. Besides, it could boost local manufacturing of certain items. Camera makers argue that products such as printers, calculators, personal computers, automated teller machines, personal computers and telephone answering machines attract only 18% GST.

In May, India collected Rs94,016 crore in GST receipts.

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ABOUT THE AUTHOR
Gireesh Chandra Prasad
Gireesh writes on the Indian economy, government policy, regulatory developments and trends in the business landscape. His areas of reporting include finance, taxation, company law, bankruptcy code, competition law, financial reporting and auditing. He also covers federal policy think tank NITI Aayog.
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Published: 19 Jun 2018, 04:09 AM IST
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