Govt unlikely to reduce GST rates for auto, biscuit manufacturers amid fall in revenue collection; fitment panel rejects tax cuts

With the increasing government concerns over the fall in revenue collection, the Goods and Services Tax panel is unlikely to offer any tax rate cut to biscuit manufactures, who have been seeking lower tax rates to tide over the demand slump, said media reports.

Amid the falling tax collections, the government assumes that reducing the GST rate to 12 percent from 18 percent will inflict a revenue loss up to Rs 2,000 crore per year and at the same time, the tax cut is unlikely to benefit the consumers, said a report in The Times of India.

Another concern of the government is that if it succumbs to the pressure of biscuit manufacturers, other sectors that face the same tax rate of 18 percent may also seek a GST cut, said the report.

Representational image. Reuters.

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In February this year, biscuit manufacturers had sought a lower GST rate saying it is an item of mass consumption and higher taxes will have an adverse impact on production as well as its demand.

The Federation of Biscuit Manufacturers of India (FBMI) had sent a representation to the GST Council demanding that biscuits be kept in the lowest slab under the GST regime.

In an apparent sign of a economic slowdown, the GST collections in August dropped to Rs 98,202 crore from over Rs 1.02 lakh crore in the previous month, according to the finance ministry.

This is the second time during this year that the revenue collection from the GST slipped below the Rs 1 lakh crore-mark. First, it happened in June when the collection was Rs 99,939 crore. However, it was Rs 1.02 lakh crore in July.

Meanwhile, the Fitment Committee, a panel that has been tasked with recommending producer levies, has reportedly refused any tax cut for cars, consumer goods, said a report in The Economic Times.

The Fitment Committee’s recommendations reportedly held the current liquidity crisis and troubles of non-bank lenders responsible for the woes of the automobile sector, which slipped into a major crisis after record sales plunge, said the report.

The GST panel may also not approve lowering the tax for the auto and allied components sector as a study has warned of major revenue losses, reported Reuters.

A government study, attached to the agenda of the 20 September, 2019 GST panel meeting, has said the total annual revenue loss could be as much as Rs 50,000 crore ($6.95 billion), if the panel decided to lower tax rates for the auto sector to 18 percent from 28 percent.

Officials in Kerala, Punjab and West Bengal say they are also opposed to any cut in tax rates in the automobile sector, or even consumer goods, because of lacklustre tax collections this fiscal.

In the April-July period, total tax revenues of 20 states fell 7 percent to Rs 4.9 lakh crore compared with the same period last year.

— With inputs from agencies