Companies Pitch for GST Rate Cut as the New Govt. Takes Charge Second Time

Source: Business Standard

Companies across sectors like durables, automobiles and real estate have been lobbying hard for a Goods and Services Tax cut as the Narendra Modi-led NDA Govt. prepares for the second term. Modi and his council of ministers were sworn in on Thursday in the presence of over 8,000 people at the Rashtrapati Bhawan.

Durable firms said the issue of rationalizing the tax rate of products, like, ACs and larger television sets, which falls currently under the 28% tax bracket, has been on the Government’s table for long. According to Mr. Kamal Nandi, the business head and executive vice-president of Godrej Appliances, who is also the president of the Consumer Electronics and Appliances Manufacturers Association (CEAMA), “Since July last year, when most appliance and electronic products were moved from 28% to 18%, companies have been asking for ACs and larger TVs (above 32 inches) to be shifted too in terms of the GST rate”. “ACs and TVs are not luxury items, but essential goods and it doesn’t make sense, therefore, to put them in the highest tax bracket. A tax cut will mean that prices will reduce, and the demand will boost,” he said. A 10% point decline in the GST rate on ACs will see a net reduction of 7% to 8% in terms of prices, sector experts said, which is a relief for consumers at a time when new energy labeling norms have pushed up prices by at least ₹ 5,000/unit.

The Society of Indian Automobile Manufacturers (Siam), too, has made a representation to the Govt. to cut the GST rate on commercial and passenger vehicles from the current 28% to 18%, Rajan Wadhera, president of Siam, told reporters on Wednesday. All commercial and passenger vehicles, including cars and two-wheelers, attract a standard GST rate of 28%. Depending on the engine size, vehicle length and fuel type, there is an additional cess of between 1 to 15% which is levied on automobiles. The request by Siam falls amid flagging sales and tepid demand in the auto market. Sale of passenger vehicles in India grew 3.2% in Financial Year 2019, the slowest in the last four years. The slowdown worsened in April with sales across all segments seeing a sharp year-on-year decline. Siam has also forecast a growth of 3-5% only for FY20, building a case for a sharp GST rate cut, said experts.

Real estate players, on the other hand, argue that the government should consider a uniform GST rate across price segments to boost sales. Currently, GST for houses up to ₹ 45 lakh has been reduced to 1% from 8% earlier in a fillip to affordable housing. While other housing segments attract a GST of 5% from 12% earlier.

A recent Anarock report said of the total 673,000 units of unsold housing inventory across cities in India, nearly 85,000 units are ready-to-move-in, with 60% of these in the under ₹ 80 lakh bracket GST Rate cut then will push up sales, reducing inventory, said experts. Mr. Ramesh Nair, the CEO of property consultancy JLL, said the government should look into the issues of ITC, which has been phased out when GST was slashed to 1% and 5%, respectively, for affordable and other housing segments. Mr. Nair said with ITC removed there was a cost implication for developers, nullifying the benefits of a lower GST rate.