As the Narendra Modi-led government is all set for the second term in office, companies across divisions like real estate, automobiles, and durables are urging for a Goods and Services Tax (GST) rate cut.
Many of the stable firms have mentioned that the concern of rationalising the tax rate of commodities like large television sets (TV) and air conditioners (AC), currently in the 28% tax bracket has been with the government for a long time now.
Since July 2018, most of the electronic and appliance products got moved from 28% to 18% tax bracket. Companies have been insisting to even shift larger TVs (more than 32 inches) and ACs in terms of the GST rate.
Electronic and appliance manufacturers believe that TVs and ACs should be considered as essential goods instead of luxury items. It is not appropriate to place these items within the highest tax bracket. Hence, with a tax cut, prices will go down and simultaneously, the demand for these items will increase.
Sector experts have mentioned that a 10% drop in the GST rate on ACs will result in a net reduction of 7% to 8% in terms of prices giving consumers relief at a time wherein new energy labelling norms have increased prices by a minimum of Rs 5,000 for a single unit.
The Society of Indian Automobile Manufacturers (SIAM) has also requested the government to bring down the GST rate on passenger and commercial vehicles from 28% to 18%. SIAM is urging GST rate cut on automobiles to bring down the pressure of high costs, which is being caused because of BS VI emission norms and new safety regulations. Also, over the past six months, there has been a significant drop in automobile sales and which is why SIAM is emphasising on the GST rate cut.
On the other hand, real estate players are debating that government should introduce a uniform GST rate for all price segments to motivate sales. As on today, for houses worth up to Rs 45 lakh, the GST has been reduced to 1% (earlier it was 8%). The other housing segments levy 5% GST currently (previously it was 12%). Real estate experts feel that the government should reduce GST charges to 1% even for houses worth up to Rs 75 lakh so that a more significant portion of the population can benefit from it.
According to a recent real estate report, out of 673,000 units of unsold housing inventory across India, almost 85,000 units are ready for people to move in, with 60% of these units falling under the Rs 80 lakh tax bracket. Hence, experts think that with a GST rate cut not only will sales increase but also the inventory will be brought down.
Real estate experts also feel that the government should address concerns related to the input tax credit, which got eliminated when the GST rate was slashed to 1% and 5% for affordable and other housing segments respectively. The elimination of input tax credit resulted in bringing down the benefits of a lower GST rate and developers faced cost implications.