Fitment panel rules out GST cut for auto, consumer durables or biscuits

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  •  Sep 19, 2019
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A panel entrusted with recommending producer levies has ruled out changes in taxes on cars, consumer durables or cookies, dashing hopes of a reduction in Goods and Services Tax (GST) for automobiles and other consumption oriented industries. The Fitment Committee’s recommendations, which will be discussed by the 37th GST Council in its meeting on 20th September, blamed the current liquidity crisis and troubles of non-bank lenders for the woes of the automobile sector, which has seen its worst sales decline in about two decades. “The Fitment Committee does not recommend any reduction in the present GST rate, on account of huge revenue implications, besides the fact that several other factors also have impact on the demand - like liquidity crunch, crisis affecting NBFC, axle load increase, abolition of check-posts after introduction of GST, cyclical nature of the industry, and structural changes like BS-IV to BS-VI,” the panel said in its 286-page recommendations to the council. The report said, “biscuits are manufactured in the organized sector and by bakeries etc. Having two different slabs for biscuits based on the selling price will be prone to evasion. The Fitment Committee does not recommend any reduction in the present GST rate.” A cut in GST rate would lead to thousands of crores of rupees in tax shortfall for the government, which is struggling to maintain its fiscal deficit at 3.3% for the current year after crossing 77% of its annual target in July. “The GST Council would take into account the GST collections, which have been below targets until now, before deciding on any reduction in rates. Since there appears to be a shortfall in the compensation cess collections, any reductions in cess would also pose a challenge,” said M S Mani, Partner, Deloitte India. The committee has also recommended tax rates be increased from 5% to 12% after a demand from railway coach manufacturers, which could not set off input tax credits and faced cash-flow problems. 

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