The Goods and Services Tax (GST) Council may alter the slab of 5 percent. Also, it can cut the rates of auto, biscuit and daily use items ie FMCG goods in the meeting on 20 September. Sources said that these changes will be made in the GST structure to speed up the economic growth rate (GDP growth). A government official familiar with the matter said, “These proposals will be put before the council.”
The fitment committee, comprising state and central government officials, met last week to discuss the potential impact on the tax rate cuts for the auto sector. The GST Council is meeting next week in Goa, which will take a final decision on it. The auto sector is seeking to reduce the GST rates on passenger vehicles (cars) to 18 percent from the current 28 percent.
Apart from GST, the auto sector also has to pay a compensation cess of 1 to 22 percent. Road Transport and Highways Minister Nitin Gadkari has also appealed to reduce GST on hybrid and other vehicles. Biscuit companies have also demanded that tax rates be reduced from the current 18 percent.
Sales of vehicles in all segments were down 23.55 percent in August. Among them, car and two-wheeler sales continued to decline last month. The government is demanding a reduction in tax rates to increase consumption so that economic slowdown does not deepen. In the GST Council meeting of September 20, states can also be asked to bear some of the burden of revenue reduction due to the reduction in tax rates on vehicles. To make up for this, a change in the slab of 5 percent or increase in slab rate is also likely to be noticed. Some state governments have demanded the addition of 12 and 18 percent slabs. He says it will be a big reform.
Compensation cess 28 thousand crore in the June quarter
The pressure on the central government has increased due to the low GST collection. After its implementation, the Center will have to compensate any loss to the states for five years. It has been estimated to increase by 14 percent during this period. The GST collection increased by 4.51 per cent to Rs 98,202 crore in August as against the target of Rs 1 lakh crore.
Sources said that the compensation cess in the June quarter was Rs 28 thousand crore. If this figure remains the same in the remaining three quarters, then it will be 84 thousand crore rupees in the entire financial year. However, considering the earnings of the last five months, a cess of Rs 58,200 crore is expected in the remaining period. 23,400 crores already raised from Cess. If we add this up, the total amount will be Rs 81,600 crore. The source said that if there is a further decline in income, then the gap between the funds and its requirements will be further increased to compensate the states for loss of income.