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India GST panel likely to recommend tax cuts on 20-25 products – sources

India GST panel likely to recommend tax cuts on 20-25 products – sources

India’s goods and services tax panel is likely to recommend tax cuts on 20-25 products on Friday but will avoid lowering rates for items that will significantly dent revenue collections, two government sources said.

The panel, comprising state finance ministers and the federal finance minister as the chair, will shortly meet to decide on reducing tax rates to boost growth that has fallen to a six-year low.

The proposed GST tax cuts will have limited impact on government revenue, the sources said.

Source: Economic-Times

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Tourism ministry plans promotions around GST rate cut for hotels

Tourism ministry plans promotions around GST rate cut for hotels

The tourism ministry is planning to highlight the recent tax cut on room tariffs in promotional campaigns overseas to lure travellers ahead of the peak winter holiday season.

The India Convention Promotion Bureau (ICPB), which works closely with the tourism ministry on promoting India as a MICE (meetings, incentives, conferences and exhibitions) destination, said it will also look at raising awareness around the announcement of lower GST (goods and services tax) rates last month.

On September 20, the GST Council tweaked taxes on several products and services, including hospitality. The GST rate for room tariffs of Rs 7,500 and above was reduced to 18% from 28%, while those between Rs 1,000 and Rs 7,500 would have to pay 12%. Hotels with tariffs of less than Rs 1,000 do not attract tax as per an earlier decision. Earlier, the slab of Rs 2,500-7,500 attracted 18% tax.

“We were waiting for the official notification which has come now. We will be launching marketing campaigns across markets on the move. It’s a very big step for boosting tourist numbers and we will provide this widespread publicity,” said Rupinder Brar, additional director general at the tourism ministry. “This was one of the main demands of the industry. We are very sure that this will boost tourist numbers,” she added.

Chander Mansharamani, vice-chairman of ICPB, said, “When an international conference comes to India, the accommodation is booked by overseas agencies. We have sent a circular to all our clients saying GST on hotel accommodation has (been) reduced to 18%. We are looking to work out something where we can convey this message further.”

Online travel aggregators (OTAs) said bookings for the coming quarter are looking up as hotels have begun factoring in the tax benefits for bookings done for stay after October 1.

“We started displaying hotel bookings with revised taxes from September 27 onwards. Over the past few days, we have seen an uptick in bookings for four- and five-star properties where the impact is fairly significant,” said Sharat Dhall, COO, B2C at Yatra.com. “The reduction of GST of 10% has definitely had an impact in terms of driving growth. We are witnessing an uptick in bookings for leisure destinations such as Goa and Rajasthan for the months of October, November and December.”

A spokesperson from MakeMyTrip said that with the revision in tax rates coming around the peak festive season, the company hopes to see a boost in tourist arrivals in Goa, Darjeeling, Jaipur and Gangtok—destinations that continue to remain favourites among domestic travellers.

Dipak Haksar, chief executive for ITC Hotels and WelcomHotel said ITC Hotels has implemented the new GST rates with effect from October 1, 2019 and has passed on all benefits to the consumers. “The rate reduction of GST will definitely result in an uptick in arrivals and hotel stays,” he said.

Sanjeev K Nayar, general manager at ITC WelcomHeritage Hotels said there has been an increase in the queries and also the bookings are getting materialised as well and that he is optimistic that this trend will now continue.

“We are very happy that a reasonable GST regime for hospitality comes at an opportune time as we are just getting into the high season and we would definitely see more traction and demand,” said Ankur Bhatia, executive director, Bird Group which runs Roseate Hotels & Resorts.

Balu Ramachandran, senior vice president at Cleartrip said any deduction in GST will be passed on and will ultimately benefit customers.

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Source: Economic-Times
Booked hotel room? Expect 10% GST refund if room rate exceed Rs 7500

Booked hotel room? Expect 10% GST refund if room rate exceed Rs 7500

Guests of luxury hotels are likely to gain from the recent government decision to slash goods and services tax (GST) on rooms priced at over Rs 7,500 to 18% from 28% now, and below that tariff to 12% from 18%. The new rates will be effective from October 1.

So, if a person books a stay in a luxury hotel with an average room rate of Rs 10,505, he will save Rs 1,050, or around 8%, under the new GST rate as he has to shell out a total of Rs 12,395 against Rs 13,446 under the existing tax regime.

The new rate will also be applicable to those who have already paid for bookings after October 1.

Typically, holidaymakers book hotel rooms in advance as tariffs are known to rocket during peak season in India, which begins in October and touches a high by the year-end.

One such vacationer, John Paul (name changed), has booked three rooms for a five-night stay in December at a luxurious Goa property. He shelled out Rs 2.6 lakh per room for five nights that included a 28% GST of Rs 57,540.

Days after his booking, the government slashed the GST and the 10-percentage-point reduction made a difference of Rs 20,550 per room to Paul’s bill.

The saving is equivalent to the price of a brand new Lenovo laptop.

Paul contacted the five-star chain for reimbursement of the balance GST amount and the hotel in an email said, “The difference of tax excess payments received will be used against extras consumed at the hotel.”

“If a customer has made part-payment while booking a room, then the adjustment will be done by the hotel at the time of final billing incorporating the revised GST rate. In case of full payment done by a customer in advance, the hotel will have to refund the balance amount to the customer. GST will be paid as applicable at the time of billing and not at the time of advance received,” said Pradeep Shetty, vice-president of Hotel & Restaurant Association of Western India (HRAWI).

Luxury hotels, which are twice as expensive to develop but command a premium pricing, account for 11% of the overall supply of 2.8 lakh rooms in India.

The GST rate reduction is likely to lead to customer savings of 5-8% on existing room rates across hotel segments, with luxury properties benefiting more, a recent Kotak Institutional Equities report said.

Interestingly, despite lowering of the GST on rooms priced at more than Rs 7,500 and also those priced between Rs 1,000 and Rs 7,500, industry executives said hotels in India continue to be the most taxed across the world.

Source: Times-Of-India

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Panel spikes plea to lower GST on 165 more items

Panel spikes plea to lower GST on 165 more items

Motor vehicles and biscuits may have hogged the headlines when the Goods and Services Tax (GST) Council decided not to lower the rates last week, but beneath the news radar, 165 other categories, including ghee, butter, cheese, and dry fruits, met with the same fate.

The Fitment Committee (FC), the sub-committee of the GST Council comprising tax officials of the Centre and the States, had reviewed rates, including compensation cess, and procedural issues in respect of over 200 categories of goods. Finally, it recommended changes or clarification for 32 categories of goods, and deferred a decision in respect of 10, but left the rates on 167 categories of goods untouched.

Based on representations, the FC analyses and decides on the merits of a change in tax rates. Its recommendations are placed before the GST Council, which accepts or rejects them.
gst
Ghee, cheese and butter attract GST at 12 per cent. There had been representations seeking that it be lowered to 5 per cent. However, the FC noted that in the pre-GST period, the tax had been nearly 12 per cent. As of now, these products are sold largely by the organised sector, by companies such as Amul and Mother Dairy. Small manufacturers can avail themselves of threshold exemption, the FC reasoned, and recommended no change.

On instant food mixes
Another proposal was for lowering GST on all convenience instant food mixes – idli mix, vada mix, dosa mix, gulab jamoon mix, thandai mix, payasam mix and upma mix – from 18 per cent to 5 per cent. The FC noted that processed food items attract 12 per cent tax, but a few items, including instant food mixes, attract 18 per cent. “These are consumed by better-off sections of society, who can afford the rate,” the FC said.

It also noted that GST on idli dosa batter had been reduced to 12 per cent. Instant food mix products are manufactured by large corporations and a rate reduction may not be passed on to consumers, but may lead to profiteering; hence no change was recommended.

The proposal for lowering GST rate on helmets, after the Motor Vehicles Act was amended, did not find favour with the FC. Inputs for helmets attract 18 per cent GST, and lowering the rate on helmets to 12 per cent may result in manufacturers seeking refund of unutilised input tax credit, with associated financial and administrative costs.

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Source: The-Hindu-Business-Line
Railway equipment-makers welcome 12% hike in GST

Railway equipment-makers welcome 12% hike in GST

Manufacturers of rail equipmenthave welcomed the GST Council’s decision to raise GST on rail equipment such as wagons, coaches and rolling stock to 12 per cent from 5 per cent. Metro rail coach-makers are also set to get a similar push.

The move will increase the competitiveness of the products made in India, said Alstom, Bombardier, Wabtec, and other rail-equipment makers.

This was a pending demand of railway wagon, coach and engine manufacturers and had been raised by the Confederation of Indian Industry (CII). Recently, Wabtec, the company that acquired GE Transportation, had explained that input components attract a tax of 12-18-28 per cent. This creates a situation when there is higher tax on inputs and lower tax on output products.

This led to an increase in cost, which had to be borne by the manufacturers to the extent of the gap between the taxes.

“The announcement to increase GST rate from 5 to 12 per cent on rail goods reinstates the government’s intention to bring the (Indian rail) industry back on track,” said Anand Chidambaram, Chairman, Rail Transportation and Equipment Division, Confederation of Indian Industry.

Boost to Make in India

Alain Spohr, Managing Director, India and South Asia, Alstom, said the move will provide a huge impetus to global organisations such as Alstom to continue supporting the Make in India programme.

Sudhir Rao, Managing Director, India, Bombardier Transportation, said the GST Council’s move will “remedy the inverted duty structure that has burdened rolling stock manufacturers for over two years, besides resulting in lower prices to various metro companies across the country; this will also level the playing field for companies such as Bombardier, who have invested heavily in India to provide world-class railway systems and products”. Sandeep Selot , Managing Director, GE Diesel Locomotives Pvt Ltd, said the GST move will boost the Make in India initiative, while the reduction in corporate tax will go a long way in competing in global markets.

Finance Minister Nirmala Sitharaman has also announced a cut in GST on marine fuel from 18 per cent to 5 per cent.

She said that 0.5 per cent FO has been added, a move which seems to indicate low sulphur fuel oil will also be charged at 5 per cent GST, although shipping industry players are awaiting further clarity.

Source: The-Hindu-Business-Line

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GST Council meet: States to flag poor revenue mop-up

GST Council meet: States to flag poor revenue mop-up

Revenue considerations are set to play a big role at the meeting of the Goods and Services Tax (GST) Council on Friday with many States expected to raise concerns about muted tax growth.

Sources have indicated that the poor collections under the indirect tax levy are a source of concern for both the Centre and a number of States like Kerala, West Bengal and Delhi.

“A number of States are likely to flag concerns about revenue losses and muted growth trends. Another round of reduction in GST rates could further impact the Exchequer and the bigger worry is that this could potentially be the second year of subdued GST collections,” said a person familiar with the development.

GST mop-up fell to less than ₹1 lakh crore and was at ₹98,202 crore in August and indications are that the trend is likely to continue with the slowdown.

The government had been hopeful that with stabilisation of the indirect tax revenue system and improved compliance, collections should have actually risen to about ₹1.20 lakh crore per month this fiscal.

The Budget 2019-20 has pegged the full year GST collections at ₹6.63 lakh crore, which is a tad lower than the Interim Budget target of ₹7.61 lakh crore. There are already concerns emerging amongst experts on whether this target will be met.

“There is expectation of a revenue shortfall under GST. The Budget estimates are ambitious and with the investment and financial slowdown, the collections are expected to be lower,” said DK Pant, Chief Economist, India Ratings.

Analysts believe that at the current rate of collections, monthly mop-up will have to reach about ₹1.18 lakh crore to meet the Budget target. States are concerned that another round of GST rate cuts could further impact collections with losses estimated at about ₹45,000-50,000 crore.

Bihar’s deputy Chief Minister Sushil Kumar Modi recently said that most States are not in favour of further duty cuts for auto companies.

Kerala Finance Minister Thomas Isaac had said in a tweet earlier this month: “It is not high GST rate that has caused auto crisis. Pre-GST combined tax, excluding service tax, ranged between 32 per cent and 54 per cent. Now, tax including compensation cess ranges from 29 per cent to 46 per cent only. If the Centre is keen to reduce it further, abolish cess. The rate would come down to 28 per cent.”

Source: The-Hindu-Business-Line

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Ahead of GST Council meet, biscuit makers hope for rate cut

Ahead of GST Council meet, biscuit makers hope for rate cut

Biscuit makers are hoping for a lowered tax rate on widely consumed mass biscuits priced below ₹100 a kilo as an increased instance of GST has put additional burden on manufacturers.

The GST Council is expected to meet on 20 September and could consider tax revisions on various goods. Auto and biscuit manufacturers are hoping for a reduced tax burden amid a slump in consumer demand.

Mayank Shah, category head, Parle Products, and vice president, Biscuit Manufacturers Welfare Association said biscuit manufacturers are hoping for a reduced tax burden on lower-priced biscuits or those priced below ₹100 per kilo from the current 18% to 5%.

“Our request is to continue the distinction between two categories of biscuits ie those below and above ₹100 per kilo because the sub ₹100 per kilo biscuits are targeted at the middle class and lower strata of the society—the consumption is huge there,” Shah told Mint. “We are okay paying 18% GST on biscuits priced above ₹100 per kilo,” Shah added.

Biscuits priced below ₹100 per kilo include largely affordable biscuits such as glucose, and milk and account for 25% of all biscuit sales in India; these are typically priced under ₹10. Earlier in September, the Biscuit Manufacturers Welfare Association, which represents close to 40 biscuit makers, including Parle Products, made fresh petition to the government seeking a reduction on tax slabs.

To be sure, biscuit makers have been seeking a reduction in taxes on biscuits in the mass market segment since 2017, after the government clubbed them in the same tax bracket as premium cookies or those priced above ₹100 per kilo, thus doing away with a varied tax structure under the new GST regime.

This, companies added, has prompted manufacturers to reduce the size of biscuits offered per pack amid growing cost pressures and even take price hikes leading to a slump in demand. Shah added that in the first quarter of the current year premium biscuits or cookies grew between 7% to 8%; while mass biscuits or those priced below ₹100 per kilo declined by 8%, he said citing industry figures.

India’s biscuit market is estimated at over ₹31,200 crore and sees the participation of large companies such as Britannia Industries, Parle Products, ITC, Mondelez India, among others. It is among the largest categories of packaged foods sold in India.

But an increased instance of tax has burdened manufacturers who complain that they have had to resort to price hikes or cut the grammage of biscuits priced under ₹10 to ensure consumer demand is intact. Shah added that last December the company took measures to control costs and has since reduced the number of biscuits sold in its ₹2 to ₹5 packs, including Parle-G —India’s largest selling biscuit.

“We had absorbed the costs for a while, but then last December we started to reduce the quantity offered so that we don’t pass on the prices to consumers,” Shah said. He added that the company had to rule out price increase in ceratin packs as shoppers are “extremely value-conscious, they notice things like this and easily switch to cheaper alternatives.” For Parle, biscuits priced under ₹100 a kilo account for 40% of its sales.

Anmol Industries, which sells namkeen, butter and cream biscuits priced between ₹5 to ₹20, said it has been gradually reducing the size of some of its biscuit packs over the last two years as raw material prices, especially wheat, continue to climb. “Earlier we used to have a 60 gram pack at ₹5, today it has been brought down to 45 grams and if this continues we could soon be selling 40 grams,” said Gobind Ram Choudhary, managing director at the company.

Choudhary who is also part of the India Biscuit Manufacturers Association, an industry body of ten biscuit companies in the North, made representation to the government to reduce the GST on biscuits are priced below ₹150 per kilo to 12% about two months ago. “For us these account for 90% of our sales,” he added.

The move to push to lowered tax rates comes amid a slowdown in consumer demand largely aggravated by a slump in rural consumption where consumers are holding back on purchases of essentials such as household products and staples. This has spooked FMCG companies, which draw over 35% of sales from the hinterland.

In its quarterly update on the FMCG sector for the April-June quarter, research firm Nielsen said that categories such as salty snacks, biscuits, spices, soaps and packaged tea led the slowdown during the quarter. Nielsen also lowered its guidance for the sector for the full year.

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Source: Live-Mint.
State tourism ministers seek cut in GST on hotel rooms to boost sector

State tourism ministers seek cut in GST on hotel rooms to boost sector

Tourism Minsters from different states today urged to reduced GST for hotel rooms. They also asked for simplification and rationalisation of various taxes and levies to attract tourists and take on global competition.

“The Tourism Ministers’ conclave 2019 at Kovalam, Kerala notes with concern that the GST Council of India has imposed 28 per cent GST on hotel room tariff over Rs 7,500 and 18 per cent tax on rooms with tariffs between Rs 2,500 and Rs 7,500. This tax rate is high compared with other countries,” said a resolution unanimously adopted by the conclave.

The resolution, moved by Karnataka Tourism Minister C T Ravi, said reduction in GST in hotel rooms is essential to attract more tourists.

The resolution also sought measures to reduce high airfares, as they are compelling leisure tourists to explore alternative global destinations.

“We express concern over the high airfares during peak season and festivals, which are forcing holiday-makers to opt for economical destinations. Besides, unexpected closure of certain airlines/carriers has led to increased airfares while minimal air connectivity with 2-tier and 3-tier cities has only compounded the problem,” it stated.

The conclave also took note of the high and varied inter-state tourist vehicle taxes and called for its rationalisation across all the states to ensure seamless travel.

In another resolution, the conclave proposed formation of Regional Tourism Councils and developing tourism circuits, which can be region-based and in neighbouring states. “We resolve to jointly promote our tourist attractions across the world in order to give a cutting edge to our campaigns,” it said.

The resolution, moved by Odisha Tourism Minister Jyoti Prakash Panigrahi, said setting up Regional Tourism Councils will facilitate periodic interaction among different states and enhance collaboration.

Union Minister of State (I/C) for Tourism and Culture Prahlad Singh Patel, according to a press release from the State government, said while the Centre would extend its support to development of tourism in all states, it is necessary to think about ‘one nation one tax’ regime.

“We should revisit our perception about GST. Tourists come not only to stay in hotels. We have to also think about one nation one tax. There is also the issue of transport tax. All states should evolve a consensus to streamline it,” he was quoted as saying.

Describing e-Visa as a revolutionary step, he said the Centre has taken some steps to streamline it and make it more tourist-friendly.

Source: Business-Standard.

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Select states not in favour of GST rate cut for auto, fear revenue loss

Select states not in favour of GST rate cut for auto, fear revenue loss

The automobile sector, which is already undergoing one of its worst phases, may further take a hit amid reports that several states including West Bengal, Bihar, Punjab and Kerala are against the GST rate cut.

An ET Now report said that these states believe high taxation is not a reason behind the crisis in the auto sector. “States claimed that GST is not behind the slump,” ETNow said.

These states are afraid of the loss of revenue in case GST rates are slashed. “Reducing the 28 per cent tax category will cut compensation cess kitty,” the report added.

The report further said that states may take up weak revenue position in the upcoming GST meet. The council may also take up the issue of GST revenue leakages.

The report comes days before the GST Council is scheduled to convene on September 20 when, among other things, it is expected to take a call on the industry’s demand for a cut in goods and service tax on automobiles.

The Centre may be forced to dip into its Consolidated Fund of India, ETNow reported quoting sources. “Centre to dip into the fund to meet 14 per cent revenue commitment to states,” it said.

Earlier, Bajaj Auto managing director Rajiv Bajaj in an earlier with ET also said that the current crisis in the automobile industry in the country is largely due to “overproduction and stocking” by companies and to a small extent to the economic slowdown, and there’s no need for a GST cut.

“There’s no industry that keeps growing forever without correction, so no point chasing that mirage,” Bajaj said in an interaction with ET. “The answer lies in being global so that the company doesn’t fall sick if one market catches flu.”

Source: Economic-Times.

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Auto LPG body seeks GST cut, level playing field to spur usage

Auto LPG body seeks GST cut, level playing field to spur usage

The government should reduce GST on LPG used in automobiles to 5 percent to provide the environment-friendly fuel a level playing field and spur its usage, the association of auto LPG has demanded.

The Indian Auto LPG Coalition (IAC) wants the government to treat auto LPG at par with any other clean fuel like CNG and provide similar fiscal regime as a mix of such fuels would be needed to curb urban pollution in the world’s fastest-growing economy, its director-general Suyash Gupta said.

LPG is a clean fuel like compressed natural gas (CNG) and has cost advantages over diesel or petrol. Auto LPG is used in 70 countries world over as compared for 4-5 nations including Iran, India, and Pakistan using CNG as automobile fuel.

Auto LPG requires a lighter cylinder than CNG and takes almost similar time as petrol/diesel for a refill, he said.

“We have written to Union Finance Minister Nirmala Sitharaman as well as all members of the GST Council for considering reducing GST tax on auto LPG to 5 percent from 18 percent currently,” he said.

LPG used for domestic purposes is taxed at 5 percent and high incidence of tax for its usage in automobiles provides an incentive for illegal diversion, he said.

IAC also sought a reduction in GST on auto LPG kits to 5 percent from 28 percent.

“Providing policy level support and enabling a quicker growth of environment-friendly fuels is imperative now and just not an optional issue anymore,” he said.

He said, while the government is providing Rs 10,000 crore subsidy to push for sale of electric vehicles, auto LPG does not need any subsidy allocation – just a level playing field through policy interventions such as lowering GST.

Auto LPG, when compared to CNG, has 13 percent lower methane emissions and slightly lower carbon dioxide emissions on a well-to-wheel basis, he said.

Globally, auto LPG is the third most commonly used automotive fuel after petrol and diesel. Over 26 million vehicles across 70 countries use auto LPG and seven of the 10 largest car manufacturers produce LPG powered cars, he said.

In India, auto LPG is available in 500 cities a more than 1,100 fuel stations.

He said auto LPG costs around 40 percent less than petrol.

“Unlike CNG, auto LPG can be easily and successfully installed on 2-wheelers also. Emission from 2-wheelers rank right on top, in terms of its contribution to the urban air quality issues because of high particulate matter (PM) emissions,” he said.

Gupta said over 1.5 lakh three-wheelers run on auto LPG in Bengaluru where it is taxed at par with CNG.

In other cities such as Delhi, CNG has lower tax incidence.

Source: Money-Control.

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