The Central Board of Indirect Taxes and Customs (CBIC) is reportedly meeting key industry representatives this week to make sure the recent reduction in goods and services tax (GST) rates is passed on to consumers. This is as per a report by Moneycontrol.
The Moneycontrol report elaborates that the board will meet stakeholders from three big sectors—hospitality, insurance and textiles—along with others over the coming days. The aim is to ensure that retail prices reflect the new GST rates from September 22.
“The government is nudging industry for passing rate cuts benefits. We are hearing them too, to see if they require any support,” said one official to Moneycontrol.
GST new rates on hospitality, insurance and textile
On September 3, the GST Council had introduced major revamp in tax slabs. The GST new rates are expected to improve consumption and boost spending, especially in these three sectors-
The GST rate for hotel rooms priced at Rs 7,500 or less per unit per day will now attract only 5% GST without input tax credit (ITC) instead of 12%. Stays priced above Rs 7,500 will be taxed at 18%. All individual health and life insurance policies from GST have been exempted from earlier 18%. The exemption will cover health, life, reinsurance, family floater and senior-citizen policies.
In textiles, GST on readymade garments priced up to Rs 2,500 has been cut to 5% from 12%. Man-made fibres, yarns, handloom, handicraft items and carpets will also attract a lower uniform rate of 5%. However, clothes above Rs 2,500 will continue to be taxed at 18%.
Focus on passing benefits to end consumers
“The idea is to ensure that associations can help companies with the implementation of the new GST rates as well as educate small manufacturers about the benefits of the rate cuts. All of this is to ascertain that consumers can enjoy the benefits of the new rates,” a second source said Moneycontrol.
However, industry feedback has been mixed. Some experts in the hospitality and insurance sectors warn that unless companies are allowed to retain input tax credits, the actual benefit to consumers may not match the lower tax rates.
Auto dealers flag pricing hurdles without ITC: Report
The automobile sector is also facing challenges. Car dealers say the absence of input tax credit makes it difficult to adjust pricing. According to Moneycontrol’s earlier report, the government is considering whether blocked “compensation cess credits” can be refunded to dealers holding inventory bought at older GST rates.
From September 22, SUVs and cars above 1200cc are set to attract GST of 40%, lower than the current 45–50% levy, which includes 28% GST and 17–22% cess.
FM vows strict monitoring of GST cuts
Finance Minister Nirmala Sitharaman recently stressed the importance of ensuring that the benefits of GST cuts reach citizens. In an exclusive conversation with Financial Express, she said she would personally monitor whether the tax cuts are being passed on to consumers.
“I will personally monitor it from September 22, getting inputs from the district level, associations, MPs, etc. Once the information reaches us, we will engage with those who have not passed on the benefits to consumers. We are engaging with the industry to ensure that they give a commitment in this regard,” she said.
In an interview with Network18, Sitharaman also said, “Many citizens have raised this issue (of passing GST cut benefits to citizens). We will have to keep talking with the industry; we’ll have to nudge them.”
The GST Council has approved a simplified structure with a standard rate of 18%, a merit rate of 5%, and a special demerit rate of 40% for select goods and services.