Two-wheelers may see price drop as GST council likely to consider proposal for rate cut

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Union Minister of Finance and Corporate Affairs Nirmala Sitharaman while speaking to industry leaders said their approach to consider a GST rate-cut on two-wheelers would be examined. She admitted that the category is not ‘luxury’ nor a ‘sin’ good hence deserves a rate review.

The Finance Minister stated the concern would be discussed with the Goods & Services Tax (GST) Council. Two-wheelers are presently taxed at 28%. The change comes before the expected GST meet that is scheduled for September 18. 

“Finance minister Sithraraman ensured that this was really a good advice from the industry as this category is not a leisure nor a big sin and therefore deserves a rate revision. However, this will be surely discussed with the GST Council,” Confederation of Indian Industries (CII) announced in an announcement.

A tax reduction before the festive season can likely encourage demand amid a severe economic scenario due to the pandemic COVID-19.

During her conversation with industry heads, the finance minister emphasized that fundamental improvements are an essential priority of the government as has been indicated in the slew of measures and policies declared after the outbreak of the pandemic COVID-19.

Every policy that was introduced had a fundamental segment. Consequently, the changes are having a notable impact on the restoration process, which we are currently observing.

Moreover, in order to help the recovery method, the Home Ministry has given out directions to the state governments for requiring no barriers to the movement of people and the inter-state movement of goods & services. “There cannot be a better chance for example collaboration between government, regulators and industry to assure that Indian comes out from the existing emergency”, she replied.

Taking knowledge of the fact that the pandemic has disproportionately harmed many sectors such as tourism, real estate, hotels & hospitality, and aviation, the Finance Minister said that these are crucial sectors that have vital multiplier impact on the economy. In order to relieve the pain of a few of these weak sectors, the Standard Operating Procedures (SoPs) for the hotels, banquets & related exercises will be looked into, she affirmed.

On the issue of strategic disinvestment, Sitharaman highlighted that there is a requirement to move fast on cabinet cleared disinvestment proceedings.

About the private investment cycle that got a spur from the corporate tax cut in September 2019, investments, however, couldn’t take off due to widespread of the pandemic COVID-19. Finance Minister was of the opinion that in a post-COVID world, these should fertilize. “With post-COVID recoveries happening, emphasis has to be on choosing of data-driven manufacturing models through turning greater investments in these standards”, she further added.

On the matter of local manufacturing, Sitharaman said that Productivity Linked Incentives (PLIs) scheme has reached with excellent reply and has supported speed up the production of essential bulk drugs and APIs in 6 states.

On paused payments by the government agencies, it was said that the Finance Ministry is taking periodical reports to facilitate the due payments to the industry. Further, the Finance Minister alluded that the infrastructure sector represents a crucial role in speeding up growth momentum; hence, to provide its further financing assistance, external funds will also be appreciated.

Responding to a question about the demand for lowering GST rates on 2-wheelers, she ensured that this was undoubtedly good advice as this category is neither a luxury nor a sin good and hence deserves a rate review. The matter and discussion will be taken up with the GST Council, she added.

Uday Kotak, President, CII, in his opening statements, highlighted signs of a nascent improvement from the falls observed in April-May as a result of the supportive actions taken by both the government and RBI. However, the localized lockdowns imposed in several States has provided increase to supply-side bottlenecks, that could prevent growth when demand-side cranks up. He continued that government-owned institutions like SIDBI, NABARD, and NIIF have the potential to grow into development finance corporations in order to promote restoration.

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