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Here are the sectors that may receive a GST rate cut next

By Finserv MARKETS - Nov 20,2019
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Here are the sectors that may receive a GST rate cut next

After 15 months of implementation, GST-covered business entities are still on a roller coaster ride of compliance. When it seems that things have settled down, there’s another rate revision, new rules or reform that leaves GST assessees scampering for compliance.

On the other hand, there were few industries expecting healthy GST rate cuts this quarter but have been disappointed with the recent GST council recommendations. A GST rate cut is good for business as well as consumers as it translates to cheaper goods and services and increased sales.

Heeding the clamour from business houses to implement GST tax rate cuts, the GST council headed by the Finance Minister, Nirmala Sitharaman, convened a meeting on September 20, 2019. The meeting didn’t result in across-the-board tax rate cuts but only for a few industries. In fact, the GST council recommended hiking the tax structure for some industries.

Apart from grappling with the compliance requirements of GST, businesses today are facing a serious credit crunch due to lack of business loans. A series of high profile loan frauds, defaults and bankruptcies have put banks on the back foot and businesses have to follow strict norms to get a business loan.

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Recently announced GST rate cuts in various industries

Following the 37th GST Council Meeting on September 20, 2019, a number of rate cuts were announced. The major rate cuts according to sectors included:

  • Lower 12% cess on 1,500cc diesel and 1,200cc petrol vehicles
  • Zero GST on jewellery exports
  • Hotel accommodation tax reduced to 12% from the existing 28% for those hotels with tariffs less than Rs. 7500
  • Reduced GST rates on precious and semi-precious gemstones

The much expected rate cut for the auto and cement industry didn’t happen. Perhaps, it was because the finance minister had already announced the reduction of corporate tax rates recently.

Apart from the above major sectors, there are significant GST rate cuts in the following industry:

GST Rate Cuts 2019

Item Current rate Revised rate
 

Plates and cups made of flowers, leaves and bark

 

5%

 

0%

 

Outdoor catering

 

18%

 

5%

 

Diamond job work

 

5%

 

1.5%

 

Hotel rooms (Rs. 7,500 or above)

 

28%

 

18%

 

Hotel rooms (Rs. 1,000-7,500)

 

18%

 

12%

 

Marine fuel

 

18%

 

5%

 

Semi-precious stones

 

3%

 

0.25%

Source: Mondaq.com

Upcoming or desirable GST rate cuts, industry-wise

After the initial hiccups, things have significantly fallen back on track with regards to GST but there are several areas of concern and unfinished agendas to be addressed in 2019-20.

Though there are still some GST rate cuts that are desirable, we shouldn’t expect further rate cuts in major industries as GST revenues have not been growing as expected. Still we can expect GST rate cuts in the cement and automobile industries based on how these two industries perform in the near future.

Summary of what to expect next:

  • Reduction of tax rate on cement to mitigate the impact of higher property prices and low demand in the realty sector.
  • Bringing electricity under the purview of GST to bring down production costs in the manufacturing sector.
  • Bringing petroleum products under the GST umbrella.
  • Lowering of GST on automobiles
  • Simplified single return filing in a month instead of twice a month.
  • Introduction of the electronic tax invoice system or e-invoicing.

Prior to the recent GST council, there were hopes and enough indications that the GST council will recommend decent rate cuts in major industries to tackle the slowdown and dipping GDP growth. But nothing much was done to reduce GST rates, especially in the auto industry, which has been severely affected by the downturn.

Perhaps, it may be because of some states’ reluctance to reduce GST rates because of a grim revenue situation. Hopefully, states will have a different view based on future developments.

On a side note, the government and RBI should leave no stone unturned to solve the credit crisis faced by small and medium enterprises because they are the backbone of the economy. If you are a small- or medium-sized business looking for hassle-free and fast business loan up to Rs. 30 lakh, consider taking a Bajaj Finserv Business Loan available on Finserv MARKETS. With a Bajaj Finserv Business Loan, you also get access to your Financial Fitness Report and customized insurance plans to protect your business loan.

Also read all about GST, its types and impact only at Finserv MARKETS.

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