Industry should not expect any more big-bang GST rate cuts: Assam FM

Himanta Biswa Sarma
After the Goods and Services Tax (GST) Council on Friday slashed rates on hotel room tariffs, Assam Finance Minister Himanta Biswa Sarma ruled out any big-ticket rate cuts in the near future. He told Dilasha Seth on the sidelines of the Council meeting that cuts in corporation tax announced by Finance Minister Nirmala Sitharaman will help in economic recovery. Edited excerpts:

What are the other items where we could see a reduction (in tax rate) going forward?

I don’t foresee any more big-bang reductions in GST rates as we are already under stress in terms of revenue. Most of the states are dependent on compensation. So until and unless the Finance Commission awards are declared, I don’t think that the Council is in a position to reduce rates on any items.

Are you completely ruling out GST rate cuts for the auto sector in the near future?

I think the industry should not expect any big rate cuts from the GST Council. Whatever we could have done, we have done. We are working on simplifying the return filing process, but as for rates, (there will be no decision) before we see the report by the Finance Commission.

But these sectors have argued that a GST rate cut will help improve demand...  

The finance minister has given the industry a huge reduction in corporation tax rate. Now, the industry should work on bringing growth. There should not be any more GST cut.

What was the Finance Commission chairman’s view on the current rate of revenue assumption of 14 per cent?

The Finance Commission chairman discussed a slew of issues, including buoyancy on tax present rate of compensation that states are getting at 14 per cent. However these are all tentative discussions.

When do you think the GST revenues will stablise?

After the cut in corporation tax rate, I think buoyancy will come. We need to have a spell of good growth. I think GST revenues will see decent growth this year, but for stabilisation, you need (to wait for) at least three years. From next year, we will see good growth.

Did the Finance Commission chairman point out that the 14 per cent revenue assumption for GST compensation to states was much higher?

When we decided on this, states’ revenue was growing at 11 per cent, which was their entitlement. But if you recall words of former finance minister Arun Jaitley there was a ‘grand bargaining’ done with states.

States surrendered all taxation rights and now they do not have the powers to augment revenue position. That’s why the term grand bargaining was used. The 14 per cent revenue assumption will continue but whether GST itself will be in a position to have that kind of buoyancy over next four-five years is the question. 

How is the government going to revive the GST revenue collections?

There has been an increase in compensation over the last two months. The buoyancy that we expected in revenues hasn’t come yet. Under the GST structure, the rate is much less than the earlier value added tax regime. There is a need to study it in depth and do an assessment of what we have done so far. We need to sit down and analyse.

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