Auto manufacturers were told that they would have to convince state governments if they wish to get duty relief.
NEW DELHI: Goods and Services Tax (GST) Council, which is slated to meet on Friday will take up an array of options on possible tax relief for automobile manufacturers, but may not be able to come to a final agreement on the issue, given demands by states that tax cuts should be compensated by increasing the quantum of compensation from the Centre.
However, a cut in GST for auto component makers and minor relief for certain consumer goods including biscuits costing less than Rs 100 per kg and for hotel rooms costing over Rs 7,500 per night may be agreed upon, said officials.
Biscuit makers have written to the political leadership requesting that the GST on biscuits costing less than Rs 100 per kg should be reduced from 18 to 5 per cent. They have pointed out that in the pre-GST era the rate on such biscuits was zero.
Officials said they had studied the impact of both rate cut for automobiles from a current 28 to 18 per cent for a year and a block of three years, however, states were unwilling to accept a cut as it represented a huge cut in revenue earnings.
“Most states, both opposition ruled as well as NDA ruled, have said they are willing to accept a cut only if the Centre increases the quantum of compensation for revenues lost to the state,” top finance ministry officials said.
According to sources, a delegation of auto manufacturers who met the top finance ministry brass were told diplomatically that they would have to convince state governments if they wished to get duty relief.
“State governments for their part have passed the onus back to the Centre stating that they were willing to cut rates only if the Centre was willing to compensate them for the revenues loss,” said the director of one leading Gurugram-based automaker who was part of the lobbying effort.
With some Rs 50,000 crore calculated as the revenue likely to be foregone, it seems unlikely that either side would be willing to agree for a rate cut.
However, officials said the demand by auto component units who supply to both Indian car-makers as well as export globally that instead of taxing some components at 18 per cent and others at 28 per cent, the Central government should consider taxing all automobile components at uniform 18 per cent.
Source- New Indian Express.