Big-bang GST rate reduction unlikely for this fiscal year

Any reduction in GST rates for the remaining of the current fiscal year is unlikely, a senior government official said.

"The revenue situation is difficult. There's a possibility that the Centre may have to pay more in compensation to states," the official told Moneycontrol.

In its last meeting held in September, the GST Council approved a cut in tax rates on hotel rooms with a tariff of Rs 7,500 and above to 18 percent and those with tariff below Rs 7,500 to 12 percent. GST on room tariff below Rs 1,000 has been scrapped.

Many industries have been demanding a GST rate cut to boost a slowing economy. Passenger vehicle sales in the world's fourth-largest automobile market have slumped in the past year as lack of financing options, increase in ownership costs and an economic downturn have discouraged people from buying cars.

"The last GST rate cut has negligible revenue implication. Now, our focus is on stabilising revenues. So many sectors have demanded a rate reduction and we have rejected all of them," the official said.

The Centre has projected its GST revenue in 2019-20 as Rs 6.6 lakh crore, which is a 13.6 percent rise from the Rs 5.8 lakh crore collected in 2018-19.

In September, GST collections dropped sharply to a 19-month low of Rs 91,916 crore, mirroring a widening slowdown in the economy triggered by shrinking consumer demand.

This was the second straight month of decline in the GST collections. The tax collections at Rs 91,916 crore in September was lower than Rs 98,202 crore collected in August and Rs 94,442 crore mop-up in the same month a year back.

GST, which from July 1, 2017, amalgamated 17 different central and state levies, including excise duty, service tax and VAT, is a reflection of economic activity and a decline in collections indicated a downturn.

For the first five months of 2019-20, average collection stood at Rs 1.02 lakh crore. The remaining seven months need to clock an average of Rs 1.16 lakh crore to meet the target.