Two-wheelers merit GST rate revision, says FM Nirmala Sitharaman

Council to take up issue; SoPs for hotels, tourism, aviation may be tweaked

Finance Minister Nirmala Sitharaman on Tuesday said the Goods and Services Tax (GST) Council would look into the auto industry’s demand for lowering the tax rate on two-wheelers, which are now taxed at the highest slab rate of 28 per cent. The assurance came during an interaction she had with members of the Confederation of Indian Industry (CII).

“Since two-wheelers are neither a luxury nor a sin product, they merit a rate revision. Consequently, this will be taken up with the GST Council,” the CII quoted Sitharaman as saying.

The Council, slated to meet on Thursday, has the single-point agenda of compensation to states, but sources familiar with the developments said the meeting on September 17 might take up the two-wheeler rate issue to spur sales ahead of the festive season. 

The passenger vehicles industry has been requesting the government to consider a phase-wise reduction in GST on automobiles, cutting rates on two-wheelers in the first stage, and deferring the tax cut on four-wheelers to a later stage. This, the industry said, would help the government contain potential revenue loss, and at the same time provide relief to around 20 million potential two-wheeler buyers across the country.

Sitharaman said the government was open to further tweaking the Rs 3-trillion credit guarantee scheme for providing collateral-free loans to small businesses. 

The scheme is open for professionals now, she added. Earlier this month, the government had widened the scope of the scheme by doubling the upper ceiling of loans outstanding to Rs 50 crore and including certain individual loans given to professionals like doctors, lawyers, and chartered accountants for business purposes under its ambit, apart from MSMEs.

Till August 20, banks disbursed more than Rs 1-trillion loans under the Rs 3-trillion Emergency Credit Line Guarantee Scheme (ECLGS), which was announced as part of the Aatmanirbhar Bharat package.

Sitharaman said the government would consider easing the standard operating procedures for ailing sectors such as tourism, hotels and hospitality, real estate and construction, and airlines. "Some sectors such as tourism, real estate, hospitality, airlines have been affected disproportionately. 
 

Domestic revenue generation is a concern," Sitharaman said, adding the government was working with the Reserve Bank of India to ensure adequate support to banks.

In the meeting, Sitharaman said structural reform was a key priority for the government and it would move fast on the Cabinet-cleared disinvestment proposals, including that of banks. The minister further said every announcement had a structural reform component with it, and the government was reaching out to industry to understand their concerns. "Structural reforms (are) key priority for the government, reflected in government announcements to address Covid-19 challenges," Sitharaman said.

On the private investment cycle, she said that in September 2019, the government had reduced the corporate tax rate but investments could not happen due to Covid-19.