With the government desperate to reverse the prevailing economic slowdown, the GST Council is all set to make major announcements on Friday. The high-powered GST Council will discuss the agendas on tax cuts for sectors with the high-consumer interface or high distress amid a significant fall in demand and sales.
The GST Council meeting, as per the agenda paper, may take up automobiles, hotels, biscuits, matchsticks and outdoor catering segments for resetting of the GST rates. However, sources suggest all listed items may not see the GST cut due to various complexities involved.
The automobile sector, which is virtually driving the current economic slowdown, has been demanding a reduction in GST on cars to 18 per cent from 28 per cent for long. The auto players feel the GST meet is happening at the right time -- in a few days from now, the festive season will kick-start and companies will roll out offers to boost sales. They say a rate cut along with festival offers could reinvigorate the auto sector. Several states, including Kerala, which fear it'll lead to a drop in revenue, have opposed the move. The GST Council's fitment committee had assessed the rate cut impact on the auto sector and also said it would seriously hurt the GST collection, as auto sales contribute almost Rs 50,000-60,000 crore to the total GST collection.
Sources, however, say it's more of a political call the govt has to take. The Centre may also explore the possibility of a significant cut for a certain period to assist the sector. But the industry players feel a limited period offer will not address the persisting crisis, as prices are likely to shoot up again with the introduction of BS-VI compliant vehicles. This will again push the sector towards a crisis, which is why the auto manufacturers are pushing for a long-term solution. They have also demanded a significant GST cut for low engine capacity two-wheelers, which are not luxury items.
There could be some cheer for the hotel industry. The government is likely to provide relief to the luxury hotel category, which charges Rs 7,500 per night or more and invites a 28 per cent levy. A source said with the government's added emphasis on tourism, including Prime Minister Narendra Modi's call to travel to different destinations in India, the GST Council might raise the ceiling for the 18 per cent tax category to Rs 10-12,000 per night.
Outdoor caterers, who are charged 18 per cent tax, may also get some relief. The matchstick and matchbox industry has been struggling due to the two kinds of GTS taxes, and the Council may provide some relief to them too.
Sectors such as cement and textiles may also get some good news in terms of GST cut.
With the GST collection dipping to sub Rs 1-lakh crore mark last month, the Council is also considering raising the taxes on items, which are unofficially called "sin goods", like tobacco. The move could help the Centre increase its revenue.