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Revenue Concerns Delay Rate Cuts

It was expected that the council would cut the rate on electric vehicles and on small passenger cars
twitter-logo Dipak Mondal   New Delhi     Print Edition: July 14, 2019
Revenue Concerns Delay Rate Cuts

The 35th meeting of the GST Council ended without any decision on the much expected rate rationalisation. While Finance Minister Nirmala Sitharaman said rate cut decisions have been referred to the fitment committee, it is perceived that poor revenue collection is playing on the governments mind.

It was expected that the council would cut the rate on electric vehicles (EVs) from 12 per cent to 5 per cent and on small passenger cars from 28 per cent to 18 per cent, giving a boost to car sales. There were also expectations of a rate cut for some consumer durables like TVs.

Though the council did discuss rate reduction of EVs as the government wants to promote production and sale of these vehicles in the country, the rate cut would have had little impact on revenue as they are manufactured and sold in very small numbers.

Though GST collections have improved in the current financial year with monthly collections continuously logging over Rs 1 lakh crore over the past two months, it is still not enough to achieve the budgeted target of Rs 7.6 lakh crore.

The evasion tactics of businesses like fake invoices is not helping collections either. The revenue secretary said that the tax department is using data analytics to catch those evaders.

Clearly, the new government is at present more driven by revenue concerns than anything else.

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