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GST rate cut on auto could mean Rs 30,000 cr revenue loss for govt.

Date: 10-09-2019
Subject: GST rate cut on auto could mean Rs 30,000 cr revenue loss for govt
The auto industry has been hoping for a GST rate cut from 28 percent to 18 percent to bring it out of a demand slump. But, the adverse revenue impact of a rate cut might keep the government from taking any immediate decision.

As per the internal estimates of the tax department, the government’s GST revenue could take a hit of around Rs 30,000 crore if it does go ahead with the rate cut, reports Financial Express.

Another report by Kotak Institutional Securities has pegged the revenue impact figure at around Rs 45,000 crore in a year if the GST rate was cut 10 percent across the board.

The auto sector’s annual revenue contribution stands at about Rs 3 lakh crore. Currently, a 28 percent GST is applicable on automobiles including two-wheelers, along with cesses varying from 1 percent to 22 percent (since a car is considered a luxury item).

The auto sector has been facing its worst slump in 20 years with sales flagging month after month. There was a 20 percent year-on-year drop in sales in August, the sharpest monthly decline in nearly two decades. Passenger vehicle sales also plummeted nearly 31 percent in July.

However, tax officials told FE that several state governments are likely to oppose a rate cut. As per the GST Compensation Act, cesses do not apply on products that do not come under the highest tax slab. A rate cut would hence deprive states of cess collection revenue, something that would threaten the guaranteed 14 percent year-on-year GST revenue growth for states till 2022.

Source: moneycontrol.com

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