Cess recovery under GST reduces rate on automobiles not expected

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New delhi date. September 16, 2019, Monday

The recovery of cess under Goods and Services Tax (GST) does not go as expected in the first five months of the current fiscal year. In the GST system, states are charged to compensate states for their loss of income.

Some states have demanded to reduce GST rates for five star hotels, while industries like cement and biscuits have also demanded to reduce the GST rates on their products.

At the next council meeting, there is likely to be more discussion on how to increase the revenue through GST than the rate cuts. By the end of the current fiscal year, there has been a difference of Rs 5 crore between the amount collected through the cess and the amount distributed to the states on account of their income deficit.

The government believes the recovery has been reduced due to slowdown in some sectors, including auto, sources said. Against the recovery of cess of Rs 1 crore, Rs 5 crore has been recovered. The payments were made from additional funds last fiscal year, government sources said.

There is a provision in the law to compensate the states for any deficit in their income for five years after the implementation of GST. The states are paid this compensation every two months. States are demanding a three-year increase to the five-year limit.

It may be possible to discuss the rate of GST in the auto sector, but it is unlikely that the rate will be discussed at the council meeting. However, as a result of the economic downturn, revenue is being affected through GST.

In order to achieve the current fiscal year target, the treasury of the country needs to earn Rs 5.5 trillion per month.

On the other hand, some states including Goa and Rajasthan are demanding to reduce the GST rate on five star hotels.

In the automobile sector, the rate of GST is 5% which has been introduced by the industry to reduce to 5%. Five star hotels also have GST rates of up to Rs 5 per room with fares above Rs 5 per day.


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