GST Council may lower rates for farm gear, electric vehicles next week

Budget 2018-19

The GST Council may take up rationalisation of the goods and services tax (GST) rates for a handful of items at its meeting next week. These items include bio-diesel buses, electric vehicles and irrigation equipment.

The GST Council meeting will be its last one before the presentation of the Union Budget on February 1.

The relatively small list for rate reduction was finalised by the fitment committee earlier this week and may be taken up by the GST Council, which is headed by Finance Minister Arun Jaitley and comprises state finance ministers.

"The items qualifying for rate reduction in the upcoming meeting have been picked with an objective of giving a push to agriculture and clean energy. Other items in the 28 per cent tax slab will not be taken up this time with revenues yet to stabilise," said an official.

The rate for irrigation equipment may be reduced from 18 per cent to 12 per cent, while that for bio-diesel vehicles and electric vehicles from 28 per cent to 18 per cent.

Agriculture sector growth is projected to fall to 2.1 per cent in 2017-18 because of an expected decline in the rabi harvest and an almost 3 per cent fall in kharif production, according to advance estimates by the Central Statistics Office.

"Since rate reductions are under the GST Council’s purview and are unlikely to form part of the Union Budget, specific reductions for agricultural equipment and goods used by the farm sector could be considered in the next meeting. Considering the revenue decline for November, the government will be very cautious about further rate reductions unless expressly warranted," said M S Mani, partner, Deloitte India.

graph In its last full Budget before the 2019 general elections, the government is expected to announce measures to boost agriculture and small enterprises. Decisions related to indirect taxes are now taken by the GST Council.

The upcoming minor tweaks are in stark contrast to the tax rate reduction for over 200 items in November by the GST Council in its meeting in Guwahati. Further large-scale rate reductions may have to wait with the revenue collection objective taking centre stage. GST revenue collection touched its lowest in November at Rs 808.08 billion.

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