GST relief for auto unlikely: Sources

In a u-turn to the news that brought cheers to the market and took auto sectors high, India’s goods and services tax (GST) panel may not approve lowering the tax for the auto and allied components sector this week, according to Reuters reports.

The development may come riding on the fact that a study has warned of major revenue losses, two government officials told Reuters.

A government study, attached to the agenda of a September 20 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% from 28%, it reported.

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

In the April-July period, total tax revenues of 20 Indian states fell 7% to 4.9 trillion rupees compared with the same period last year.

Some states were particularly hard hit, with data showing Andhra Pradesh, Rajasthan and Punjab tax collections plunged 59%, 35.5% and 12.5%, respectively.

“I will oppose any reduction for the simple reason that it won’t be revenue neutral,” said Thomas Isaac, finance minister of the southern state of Kerala.

The auto sector, which has been reeling from the worst slump in nearly two decades, has pushed for a lowering of tax rates at the Sept. 20 GST panel meeting, in a bid to revive vehicle demand.

The GST panel is chaired by the federal finance minister and all state finance ministers are members. The panel makes decisions by vote.

Still, those states ruled by PM Narendra Modi’s BJP may be willing to support a GST cut if the federal government pushes such a proposal.