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No GST rate cut on cars, bikes: Kerala finance minister

Kerala Finance Minister Thomas Issac is not in the favor of reducing GST rates on cars and bikes.

Stated that the state government would oppose any proposal by the Centre to lower GST rate on cars and bikes in the next 37th council GST scheduled in September.

He further said “lowering of tax on the automobile would not help and instead result in revenue loss for the states.” However, in order to revive the economy and boost market sentiment, central government needs to go for fiscal expansion like the one in 2009.

Finance Minister Nirmala Sitharaman on Sunday hinted that the government has made a proposal to the GST Council to bring down the tax rate from the highest slab of 28 per cent.

According to her, during the meeting held with stakeholders of various industries (including the auto sector), they are seeking relief and is addressing their issues and recommendations. “One of the suggestions was the reduction of GST rate for the automobile sector,”

Falling in vehicle sales month after month, the industry has proposed to cut the Goods and Services Tax rate from 28 per cent to 18 per cent to tide over the crisis.

Arguing upon the reduction of tax rate, Issac said “Do you think demand slowdown in the auto sector is because of higher tax? The tax rate has been reduced so much. It has been reduced to 28 per cent. I don’t believe this argument,”

Even as the economy has slowed down with April-June quarter GDP dropping to a six-year low of 5 per cent, the Centre has decided to stick to its fiscal deficit target. Presenting the Union Budget on July 5, Finance Minister Nirmala Sitharaman reduced the fiscal deficit target to 3.3 per cent from an earlier 3.4 per cent for 2019-20.

Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) has made a strong case for reducing GST on vehicles saying it will significantly reduce the cost of vehicles and will lead to the demand creation.

According to him lower sales in the month of August indicates the market has still not in the favor of the various measures initiated by the government.

Read More: Auto industry unanimous on its demand for immediate GST reduction on automobiles to 18%: SIAM

Author: Niranjan Reddy

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