Fearing high tax rates, lobbying starts for exemption from GST
Within days of Parliament passing the Constitution Amendment Bill for rolling out the Goods and Services Tax (GST) in India, several sectors have begun hectic lobbying for exemption from the new tax.business Updated: Aug 12, 2016 10:59 IST
Within days of Parliament passing the Constitution Amendment Bill for rolling out the Goods and Services Tax (GST) in India, several sectors have begun hectic lobbying for exemption from the new tax.
One such sector is renewable energy, where most of the equipment is imported. Solar power equipment enjoys zero customs duty, while a 5% duty is levied on importing wind energy equipment. “Imported solar panels will go from zero to 18%. Thus, the solar tariffs will rise by 75 paise to ₹1 per unit,” said Ravi Seth, CFO of ReNew Power Ventures Pvt Ltd. He added that this rise in input cost will jeopardise projects on power tariffs.
“We have already made presentations before the government to keep renewable sector outside GST. Finance ministry says that once the GST Council is formed, this matter will be looked into,” said Sunil Jain, CEO of Hero Future Energies, a Hero Group company. Being on ‘zero’ custom status other duties like countervailing duty or special additional duty are also ‘zero’. And the renewable sector is also exempt from VAT and excise duty. But all this will change with the GST and tariffs will go up by at least 10%, he said.
Sources said while the ministry of new and renewable energy is in support of keeping the sector outside GST, the government did not make any commitments.
The telecom sector is also vying for similar privileges. The GST is likely to lead to a spike in charges for the consumers. The exclusion of petro products and electricity duty from the new GST will lead to a cascading adverse impact as telecom towers are a big consumers of diesel and electricity. “We are waiting for the GST Council to be formed. Hopefully, they will understand the impact on the economy and telecom sector,” said Rajan Mathews, director general of Cellular Operators Association of India.
The tourism sector is also demanding inclusion in the definition of export of services, so that they also get several exemptions. “The government will need to make an exception for the airline sector as the current service tax ranges from 5.6% to 9% of the base fare, which is considerably less than the GST rate,” said Sharat Dhall, president, Yatra.com .
However, the government seems to be against giving too many exemptions. “Industry has started sending presentations to seek exemptions, or to be in the low-tax rate. But, to have a low-standard rate, the tax base has to be large, thus exemptions will have to be granted in the rarest or the rare cases,” said a source in the revenue department.