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

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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 percent 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.”

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