The GST Council will take up a host of issues when it meets on Friday and on top of the agenda will be recommendations made by the GST Council's Fitment Committee. The committee has officers of both, the central government as well as the state governments.
According to sources, the committee has rejected the proposal to cut GST on biscuits and for the auto sector. CNBC-TV18 had reported earlier this month that the committee had expressed its reservations on such a move saying that this would reduce the government's revenues by Rs 50,000 crore every year.
Now, the rate fitment committee has formally in writing expressed its view saying that they do not believe a cut is warranted.
Pratik Jain, Leader-Indirect Tax at PwC India said, “Ultimately it will be a political decision. If you recall November 17, the fitment committee did not go through and approved all the rate cuts, but still the government went and did that. So, at the end of the day the GST Council will decide.”
Jain further added, “I hope the government does realize that demand is slowing down and rate cut necessarily does not mean a dip in revenues. If you see, several times rate cuts have happened, but the revenues have not necessarily dropped. On auto and things like that, they might still perhaps reconsider – things like biscuit and all are important, but perhaps can wait. However, in the core sector you need more employment, you need more economic activity, I think there is a case for some rate cut in the council meeting.”
Speaking about a possible higher cess on caffeinated drinks, MS Mani, Partner- GST at Deloitte India said, “I would not be surprised if caffeinated drinks are brought at par with aerated beverages. If you look at all the recommendations which the fitment committee had given when GST was launched, at that point of time I recollect that they had done an analysis in terms of what were the existing rates under the excise and VAT regime and what was the current rate. If you look at that, you will notice that in case of aerated beverages, they have put a specific footnote stating that this on account of health reasons and on account of health reasons this qualifies to be a sin product. So, if caffeinated drinks qualify and come under the same description, possibly they should come under that same category.”
The GST rate fitment committee has also proposed a cut from 28 percent to 18 percent on hotel tariff of Rs 7,500 and above or to hike threshold tariff to Rs 10,000 with 28 percent GST.
The panel has rejected a proposal to reduce GST rate to 0 percent on BMW High Security Vehicle for use of the governor of Gujarat. However, the committee accepted a proposal to exempt GST on all goods required for seventh edition of Fifa Under-17 Women’s World Cup.
The GST council is also likely to issue clarification that airlines not responsible for payment of GST under Passenger Service Fee (PSF) and User Development Fee (UDF) charges levied by an airport operator.
It is also expected that the GST Council will rationalise rates on lottery tickets. The council is expected to decide on one rate, either 18 percent or 28 percent, for both state owned and state authorized lotter.
First Published: IST