States ask industry to pass on GST benefits to end-users

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India Inc seeks low tax rates

The Empowered Committee of State Finance Ministers has implicitly asked India Inc to pass on to consumers any advantage that may be derived by keeping standard tax rates for goods and services tax low, as industry bodies have demanded.

At the first meeting of the State Finance Ministers after the Constitution Amendment Bill to enable a GST regime received Parliamentary approval, the Committee wondered if low taxes would mean cheaper products.

The States have been pitching for a GST rate of not less than 18 per cent in order to protect their revenues during the transition period. “It will be between 18 per cent and 22 per cent with a band of 1 per cent,” said a State Finance Minister, adding that industry associations did not object to a 5 per cent tax on gold and jewellery.

The industry responded to say that low tax rate would increase competition, which in turn would help them pass on the benefits.

“When value-added tax was introduced, hardly any benefit was passed on to customers despite promises from industry associations; it is likely that companies will similarly not pass through lower taxes to consumers,” said a State Finance Minister, adding that the Committee had asked industry chambers to revert to them with a detailed study on the issue.

The Confederation of Indian Industry has called for a standard rate of 18 per cent to ensure that the tax revenues of the Centre and the States would not be adversely impacted by the introduction of GST.

Meanwhile, FICCI said the merit rate under GST should be lower and the standard rate should be “reasonable”.

Nasscom, in its representation, said the sector is creating huge job opportunities and allowing small industries to sell their products. Stating that e-commerce facilitates competition, it made a case for the sector to be exempt from GST

Source: http://www.thehindubusinessline.com/economy/states-ask-industry-to-pass-on-gst-benefits-to-endusers/article9051310.ece

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