The GST fitment committee comprising tax officers from the Centre and the states has suggested reviewing of tax rates only in three months as frequent changes could be counter productive. The move comes days after industry captains raised the issue of inconsistency in tax rates under the new indirect tax regime. The recommendation is part of an approach paper prepared by the panel advising the GST Council.
The panel has noted that there has been rate rejig in case of several goods and services after the new tax regime kicked in from July 1 and hinted at fewer rate revisions in coming months. The GST Council in its 21st meeting last Saturday revised rates for as many as 40 items, including increase in compensation cess for cars.
The apex decision making body last week decided to hike cess on mid-size cars by 2 per cent, on large cars by 5 per cent and on SUVs by 7 per cent to bring tax rates on these cars to pre-GST levels.
“Fewer rate revision would ensure policy certainty for the industry,” an official said.
Private companies, especially car manufacturers, have been vocal against the change in tax rates applicable to various categories of cars, saying it will impact their investment plans.
“Implementation of GST was to a create single unified large market with simplified tax structure for the auto industry. However, the recent rolling back to multiple rates with pre-GST classification has come as a set back to the industry, shaking the confidence of auto manufacturers,” Hyundai Motor India (HMIL) said in a statement on Tuesday.
Earlier, top luxury carmaker Mercedes-Benz India had also expressed displeasure over hike in cess. The fitment committee has pointed out that quarterly review of rates, instead of revision in every GST Council meeting, will help the government achieve the goal of reducing tax slabs. It will ensure having one standard GST rate in years to come.
The recommendations of the committee are, however, not binding on the GST Council and hence they may not be accepted in their entirety. The next meeting of the GST Council is scheduled for October 24.