GST Council may discuss rate cut for auto

Debate on lower tax for certain vehicles and input tax credit for premium housing likely on agenda

VIJAYAWADA (ANDHRA PRADESH) 27-12-2018: Realtors doing a booming business: Construction of buildings are coming up on Guntur-Vijayawada National Highway, in Vijayawada on December 27, 2018. Photo: V. Raju / The Hindu

The government is likely todebate lowering the rates on certain categories of automobiles in the next GST Council meeting, according to a Finance Ministry official.

It is also likely to look at increasing the rate on premium real estate, but also restore the provision of input tax credit.

Sectoral representation

Finance Minister Nirmala Sitharaman last week completed a number of consultation meetings with representatives of various sectors including banking, non-banking finance companies, auto, financial services, foreign portfolio investors, steel and real estate.

“The industries have all made their recommendations,” the official told

The Hindu . “Some of these have to do with GST, and so the government cannot take a call on this. That is to do with the GST Council. The Finance Minister is looking into whether she will raise these issues with the council in the next meeting.”

“One of the things the industry requested and could be discussed in the council meeting is whether the tax rate on certain automobiles can be reduced from the current 28%, to encourage people to buy,” the official added.

“The other is to look into the demands of the real estate sector and see if ITC [input tax credits] can be restored for the premium housing sector.”

Real estate representatives who met Ms. Sitharaman on Sunday not only asked for an increase in the tax rate applicable to premium housing, but also restoration of the provision of input tax credits, which would effectively reduce their tax incidence compared to the current system.

The GST Council had, in its 33rd meeting in February, reduced the rates on the under-construction premium housing segment to 5% from the previous 12% but also removed the input tax credit provision.

14% rise

This, according to the industry, has meant that the effective tax rate on the sector had risen to about 14% as key inputs such as cement are taxed at 28% and the sector cannot avail of input tax credits for them.

The date for the next Council meeting has not been announced yet.