India could enquire the goods and services tax (GST) structure to going further cut the number of products in the highest slab of 28% as it tries to turn back a lean in demand.
Few states have favoured a deduction in tax rates, tensed that the slowdown may get entrenched, and have communicated their concern to the Centre.
The GST Council may have a meeting on June 20, ahead of the budget presentation on July 5, and these concerns could figure in the discussions. This will be the first meeting of the council to be chaired by Nirmala Sitharaman after she became union finance minister in the new government.
“Something needs to be done early — demand slowdown is quite visible,” said a senior government official with a state government that’s likely to press for a deduction in tax rates. “It could get further entrenched… Jobs are getting impacted.”
Automobiles, for instance, are placed in the 28% GST rate.
This will Depend on Revenue Position
They also face a compensation cess, depending on size and segment. A lowering of rates will minimize prices and possibly encourage consumers to spend.
RBI cut interest rates for the third time in together to a nine-year low and has changed its possibility to ‘accommodative’ amid burgeoning concerns on the growth front.
The Indian economy slumped to a five-year low of 6.8% growth in FY19, pulled down by 5.8% increase in the January-March period — the min. in 20 quarters.
Most consumer goods companies reported a hit in March quarter earnings, mainly on account of a rural slowdown and weak consumer sentiment, according to an analysis by Edelweiss. Rural growth was down to about 1.1 times urban growth compared to 1.3 times in the preceding quarter. Consumer goods sales have remained sluggish, as per reports.
Passenger vehicle sales reduced 17% in April and May was equally bad for maximum companies. The largest carmaker Maruti Suzuki NSE 0.10 % reported 22% lower sales in May from the year earlier.
Experts also pointed to the matter of collected credit in the auto sector.
“Many dealers have been facing the issue of accumulated input credit due to post-sale discounts and slow movement of inventory,” said Pratik Jain, national leader, indirect tax, PwC. Jain said there is a case for reduction in GST rates to spur demand, particularly for small and environment-friendly cars.
E-INVOICE AND OTHER CHANGES
The GST Council could also take up a proposal on introducing electronic invoicing at its meeting, besides changes to the law. It could also discuss increase of the anti-profiteering framework, which can be carried out via a notification.
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