Leaner 28% GST list? Council may consider rate cut for cement, paint

The GST Council meeting on July 21 will likely be chaired for the first time by Finance Minister Piyush Goyal

A reduction in the goods and services tax (GST) rate for construction items like paints, cement, marble, tiles, varnishes, and digital cameras is being examined by the fitment committee to bring it from 28 per cent to the 18 per cent category in the next meeting slated on July 21 over video conference.
 
The cement, paint, and digital camera industry has been intensely lobbying for a rate reduction with the government. If approved, the 28 per cent slab under the GST would be further trimmed from the 50 items currently.
 
“We have received a representation for a reduction in rates from cement, paint, construction items, and digital cameras. We are examining whether and to what extent it is feasible in line with revenue consideration,” said a government official.
 
The meeting on July 21 will likely be chaired for the first time by Finance Minister Piyush Goyal, who has been given the additional charge till Union Minister Arun Jaitley resumes officeafter recovery.

 
The rates for 176 items, including detergents, shampoos, and beauty products were reduced from 28 per cent to 18 per cent, while on two others to 12 per cent at the November 15 meeting, leaving only 50 items in the highest bracket, including construction items, aerated drinks, digital cameras, and white goods like refrigerator, television, and air conditioners (ACs).
 
The government may decide to reduce rates for paints and other construction items like marble and granite tiles. About 70 per cent of the marble and granite business is concentrated in Gujarat and Rajasthan.
 
Reducing the rate for cement from 28 per cent to 18 per cent may result in froegoing revenue of Rs 25 billion per month, according to estimates. Currently, the government earns around Rs 60 billion revenue from the cement industry on a monthly basis. “At this point, the revenue flow is of prime importance. Foregoing that much revenue at this point may not be feasible,” said a government official.
 

“For cement purchased by real estate players, the GST offset is allowed, whereas if it is for own construction or to build a factory, no offset is allowed, which becomes a cost.
 
Therefore, there is a case for reduction in rates for cement to boost infrastructure in the country,” said Pratik Jain, partner, PwC India.
 
“The list of products taxed at 28 per cent needs to be gradually brought down, as this rate slab was originally intended to cover very few products and the movement to a standard rate of 18 per cent
 

GST now needs to begin as we enter the second year of the GST,” said M S Mani, partner, Deloitte India.

 
Several items used by the construction and the real estate sector could be considered at the initial stage, so as to give relief to homebuyers in the backdrop of expected revenue buoyancy, he added. The committee is also examining the proposal to reduce rates on digital cameras to 18 per cent from 28 per cent.
 
Companies, including Nikon, Canon, and Sony, in their representations are learnt to have pitched for a reduction in rates to safeguard the interests of an industry facing stiff competition from smartphones, which are taxed at 12 per cent. Besides, in most Asian and South Asian countries, digital cameras are taxed between 7-17 per cent, they have pointed out.
 
Additionally, the effective rate on DSLR in the pre-GST regime was lower at 17-18 per cent, with value-added tax ranging between 5 and 12.5 per cent. “In case we reduce rate on DSLR cameras, there may be a demand for lowering it for white goods too like refrigerator, ACs, and television,” said a government official.