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TO SORT OUT implementation issues across sectors, from auto to textiles and fertilisers, arising in the wake of the GST 2.0 rate rationalisation, the Cabinet Secretariat has called for an inter-ministerial meeting on Monday, according to senior government officials.
Sources said the auto sector is grappling with the problem of adjusting the cess charged on vehicles which have moved out of the factory gates and have reached the dealerships, but will likely be sold only after September 22 when the cess is technically done away with. The mechanism to adjust the cess already paid is now a festering issue.
Representatives from the bicycles, tractors, and fertilisers industry have also reached out to the government to address problems of inverted duty structure — where the duty on inputs is higher than that on finished goods. The textile and apparel industry representatives, for instance, have flagged the distortion resulting from different GST rates on unstitched fabrics (5 per cent) and stitched apparel exceeding Rs 2,500 per piece (18 per cent).
The government had consciously worked towards correcting the inverted duty structure anomalies while working out GST 2.0, especially for agricultural items and tractors. In the tractor industry, the rate for machinery and parts has been cut to 5 per cent, but some parts are still in the 18 per cent slab alongside all other auto parts. Similarly, in bicycles, the GST on complete bicycles has been reduced to 5 per cent but GST on raw materials like steel and plastic remains at 18 per cent.
An auto sector representative said most inventory with dealers will now only be sold after September 22. The adjustment of the cess amount is a vexed issue, which has been flagged by the industry to the Ministry of Heavy Industries and the Ministry of Finance. A government official confirmed that the Ministry of Heavy Industries will likely raise this issue on Monday.
The meeting is also likely to focus on how ministries can reach out to the industry to ensure that the benefits of the GST rate cuts get passed on to consumers. There is a concern, particularly in service sectors such as insurance, where individual life and health insurance policies have been exempted. Insurance companies have already said they have limited space to reduce premiums as they won’t be allowed to take input tax credit which was otherwise available when the GST rate was at 18 per cent.
The GST Council, which held its 56th meeting last week, cleared next-generation reforms under the indirect tax regime, paving way for a broad two-slab structure of 5 per cent and 18 per cent, with a demerit rate of 40 per cent rate only for super luxury, sin and demerit goods. The aim is to lower tax burden on common people with sweeping rate cuts and reduction in GST slabs, ease blocked working capital, and facilitate ease of doing business with automated refunds and registration process. All the rate changes, except those for tobacco and tobacco-related products, will come into effect from September 22.
