Finance Minister Nirmala Sitharaman on Thursday said most of the sectors have expressed their intentions to pass on the GST rate cut benefits to customers, stating that it will result in higher demands and higher employment generation.
“We are talking to every sector. I am very happy to say most of them have not just given verbal promises but they also put out advertisements saying we are assuring that we will pass on the benefits of rate cuts to the customers…majority of the people we are interacting with have clearly said that they intend to pass it on. We will watch the situation,” Sitharaman said at an event on “Next-Gen GST Reforms” in Kolkata.
“So what will be the impact? Rates have come down. Consumption can go up, higher demand and higher production. More the demand the companies which are selling those products will have to invest more, produce more. As a result, more production will lead to more jobs. More jobs means wider the tax base,” the Finance Minister pointed out.
She argued that the impact of GST rate cut on a particular sector would be 10 times higher than the benefit the sector would have got from a Production Linked Incentive (PLI) scheme.
“The rate cut and the new GST reforms will inject nearly ₹2 lakh crore into the system. We gave PLI for semiconductor manufacturers and automobile manufacturers. We want to incentivise them so that they can produce and produce well in this country. Through the rate cuts for GST, we are actually giving 10 times more than that one PLI,” Sitharaman said.
States compensation
She, however, made it clear that the Centre is not considering any compensation to States for potential revenue loss arising from the latest GST rate cuts, emphasising that the impact will be shared “equally”.
The opposition has been putting pressure on the BJP-led Central government, seeking compensation for potential revenue loss from GST rationalisation.
Sitharaman said there is “no donor-donee relationship” within the GST Council. “If GST is divided 50/50 between the Centre and the States, 41 per cent of the Centre’s share still goes back to the States. Ultimately, the Centre retains only about 23 per cent. So if revenue falls, it affects the Centre as much as the States,” she said.
She emphasised that the GST Council operates on the principle of equality, with both the Centre and States equally responsible for outcomes of rate decisions.
