Council to refer GST rate cut for cement to GoM

The Goods and Services Tax Council will likely refer the issue of the reduction of GST rate on cement from the highest slab of 28% to 18% to the Group of Ministers (GoM) on rate rationalisation, but the relief to the sector may come only next year, sources said.

The cement industry and other stakeholders including the real estate firms have been asking for a reduction in the GST rate, which will reduce the cost of not only the construction sector but also lower the cost of infrastructure projects for the government. An increase in construction activities, a labour-intensive sector, will lead to higher cement sales and buoyancy in GST collection, offsetting to a large extent the revenue loss on account of a rate cut, analysts reckon.

“We have not looked at the suggestion yet. Either Fitment Committee looks at it or it goes to the GoM on rate rationalisation. Since the GoM is also looking at other items including those in the 28% tax slab, the cement taxation issue may be referred to it,” a senior official said.

In February while speaking at an industry event, finance minister Nirmala Sitharaman assured that the GST Council will consider the proposal.

 

Brokerage firm Jefferies had said in a report that a GST cut from 28% to 18% would imply a 7-8% cut in customer pricing.

Due to recent high inflation, the urgency for rate rationalisation has been reduced because the objective of revenue neutral rate (RNR) will inevitably lead to higher rates for a large number of items and potentially jack up their prices.

The GoM on rates rationalisation also needs a new convenor after the exit of Karnataka chief minister Basavaraj Bommai after the recent assembly elections. The Council might reconstitute the GoM with a new convenor and be tasked to give a comprehensive report which could be taken up by the Council after the general elections next year.

Officials and analysts reckon that the GST Council may continue with the highest GST slab of 28% (contributes 16% to GST revenue) on luxury/sin goods while exploring the possibility of reducing the remaining three major slabs – 5%, 12% and 18% – to two.

The 12% (8% share in GST revenues) and 18% (65% share) slabs can be merged into a new median rate of 15% while the 5% (10% share in GST revenues) slab can be replaced by a new rate of 6% or 7%.

Based on the Council decision, the tax rate on cement may fall to 18% or 15% or whatever the new standard GST rate is.

Source::: FINANCIAL EXPRESS ,  dated 19/06/2023.