Ministries bat for lower GST rate for airfares, leather, cement sectors

Commerce, industry and civil aviation ministries on Tuesday pitched for lower rates for leather, cement, plantation crops and airfares under the proposed goods and services tax (GST). A committee of officials is looking at segment-wise GST rates. The commerce & industry ministry favours a cut in duty on gold imports as well.

Speaking to reporters after the meeting, commerce and industry minister Nirmala Sitharaman said she had asked the council to consider keeping the labour-intensive leather industry off the tax block or at least at a low tax rate of around five per cent since it has the potential for large-scale growth.

Both leather products as well a semi-leather ones should be taxed at the lowest rate of around five per cent, she said. India enjoys a dominant position in global leather exports; it also faces low competition. Also, the country is the second largest producer of footwear globally and the second largest exporter of leather garments.

The minister said low GST rates for the cement sector may be considered given the sector's importance in building national infrastructure and boosting the national housing scheme for the poor. Currently, the actual rate of taxation for cement producing units is up to 30 per cent in some states, which will translate into a rate of 20-23 per cent, much higher than the revenue-neutral rate, she added. The GST Council has already approved these rates — five per cent, 12 per cent, 18 per cent and 28 per cent — besides a cess over the peak rate on demerit and luxury goods.

The minister also suggested that all plantation crops such as tea and coffee be outside the purview of the GST rate, since 90 per cent of the produce is sent out as exports, bringing in foreign currency.

Overall, Sitharaman said the focus will be on shifting the taxation timeline for exporters who currently receive various forms of duty drawbacks on merchandise exports, so as to simplify the process and reduce the pressure on such enterprises.

On a separate note, Sitharaman said the ministry has sought a cut in the import duty on gold, saying, "I have been talking about cutting the duty as gold is a critical raw material for the gems & jewellery sector." She said restriction-free gold import also discourages smuggling.

The civil aviation ministry has suggested the rate of taxation under GST be not more than nine per cent as it will lead to increase in ticket prices, besides asking not to levy the tax on import and leasing of aircraft and spares.

Currently, air travel attracts a service tax of six per cent for economy class travel and nine per cent for business class travel. “The tax under GST should be around the same bracket and not lead to rise in airfares. We have submitted our proposals to the Council,” said Rajiv Nayan Choubey, secretary, civil aviation.