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Finance minister Nirmala Sitharaman on Tuesday said the Goods and Services Tax (GST) Council will take up an industry proposal to reduce the tax on two-wheelers as it is neither a luxury nor a demerit good. Two wheelers attract 28% GST.

“She (finance minister) assured that this was indeed a good suggestion (from the industry) as this category is neither a luxury nor a sin good and hence merits a rate revision. Consequently, this will be taken up with the GST Council," Confederation of Indian Industries (CII) said in a statement.

The statement comes ahead of a Council meeting on 19 September. A tax cut for two-wheelers can spur demand ahead of the festive season, and at a time when private consumption is sluggish due to the outbreak of coronavirus and the consequent lockdown. However, the government will also have to take some revenue hit in case states agree to come on board for a rate cut during the council meeting.

The government will also look into the standard operating procedures for the hotels, banquets and related activities to ease the pain of the hospitality sector that has been badly hit by the pandemic, Sitharaman said in a closed-door meeting with CII.

“Taking cognizance of the fact that many sectors such as tourism, hotels & hospitality, real estate and construction and airlines have been disproportionately affected by the pandemic, the minister said that these are critical sectors with significant multiplier impact on the economy," the statement said.

The minister said the government is open to more changes in the recently announced emergency credit line guarantee scheme for stressed micro, small and medium enterprises.

“The 3 Lakh Crore scheme is open for professionals now and the government is open to more tweaking, changes, if required," CII said in tweet quoting Sitharaman.

The finance ministry had recently expanded the scope of the government-backed, collateral-free 3 trillion emergency credit line guarantee scheme for stressed MSMEs. The scheme is now open for professionals. The government is open to making more changes, if required, she said in an interaction with CII. As of 18 August, a third of the credit has been disbursed by lenders.

Sitharaman said that structural reforms are a key priority of the government and every policy which was introduced recently had a structural component. “Consequently, the reforms are having significant impact on the recovery process which we are currently witnessing," she said, according to CII.

CII president Uday Kotak said that there are ample signs of a nascent recovery from the lows seen in April-May. However, the localized lockdowns implemented in many states have given rise to supply-side bottlenecks, which could impede growth when demand cranks up, he said.

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