Cabinet Secretariat, ministries to meet Monday on smooth GST rollout

According to another official, Finance Ministry is eager to re-examine certain sectoral issues if directed by the Prime Minister's Office

The Cabinet Secretariat — which functions under the Prime Minister's Office (PMO) — has called a meeting on Monday with the finance ministry and other line ministries to review the implementation of the GST Council’s recent decisions and ensure that the new rates are notified before the September 22 deadline, according to a government official.

 

This is to see that benefits of the cuts are passed on to consumers quickly, he said. Also, it would ensure that sector-specific hurdles are identified early.

 

According to another official, the finance ministry is eager to re-examine certain sectoral issues if directed by the PMO.

 

“If we get direction from higher authorities to re-examine some sectoral issues raised by the industry bodies, we shall do it,” the official added.

 

However, any relief would require a fresh decision of the Council followed by legislative changes in Parliament, he clarified.

 

Sources said another GST Council meeting may be convened to discuss the treatment of accumulated compensation cess, but no decision has been taken so far.

 

Under the present law, cess credits cannot be adjusted or refunded once the levy lapses, raising concerns for dealers and distributors holding such stock.

 

An email sent to the finance ministry remained unanswered till the time of going to press.

“Industry bodies have warned that the cessation of compensation cess on automobiles from September 22 could tie up working capital for dealers holding cars on which the cess has already been paid,” said the official.

 

Fast-moving consumer goods (FMCG), auto, and pharma businesses are also worried about potential losses and working capital pressure arising from the tax treatment of inventory with distributors and dealers.

 

Such stocks would have attracted a higher GST rate at the time of purchase but will need to be sold at reduced rates from September 22. This would be creating a gap that industry fears could squeeze margins unless addressed.

 

“Pharmaceutical companies have flagged working capital pressures caused by duty inversion, where active pharmaceutical ingredients (APIs) that are used to manufacture medicines, attract 18 per cent GST while finished formulations are taxed at nil or 5 per cent. Fertiliser companies have also raised sector-specific GST compliance and implementation challenges,” he added.

 

Similarly, in the textiles sector, industry representatives have highlighted distortions arising from differing GST rates.

 

For instance, 5 per cent on garments priced below ₹2,500 versus 18 per cent on those above the amount, and this complicates pricing and compliance.

 

At its 56th meeting last week, the GST Council approved a broad move towards a simplified two-rate structure of 5 per cent and 18 per cent, with a 40 per cent demerit rate reserved for super luxury and sin goods.

 

All rate changes, except those relating to tobacco, will come into effect from September 22.