Chennai based enterprises pore over fine print in GST

Noting that the GST will increase the tractor input cost by Rs 25,000 to impact farmers and agriculture, the Tractors Manufacturers Association (TMA) points to the anomaly in the tax rate.

While appreciating the Finance Minister’s decision to include some tractor components in the list of 66 items released on Tuesday under the revised GST rate of 18 pc, it observed that in implementation, “with this inverted duty structure of input tax of 28 pc and output of 18 pc, the relief provided is marginal and input cost per tractor would go up by about Rs 25,000 having an impact on industry working capital to the extent of Rs 1,600 crore.” This anomaly is due to the downward revision of GST being limited to token components of a tractor while major aggregates and components such as engines, transmissions and other parts will continue to be levied at 28 pc. “Considering the critical nature of India’s agriculture sector, TMA requests that the GST Council implement in spirit and purpose the Finance Minister recommendations and reconsider the latest decision by extending 18 pc GST across all tractor components which are clearly identifiable and distinct from any other auto application,” a statement said.

Mallika Srinivasan, Chairman and CEO of TAFE said, “We are requesting the revenue department to reduce duty on all components that go into the manufacture of tractors like engines, transmission, axles, center housing, front and rear tires and tubes and other parts thereof, from 28 pc to 18 pc upholding the statement of the finance minister in letter and spirit. This would be much needed to ensure that the farming community does not suffer,” she said.

Also, while the transitional provisions in respect of stocks held at depots and dealerships are extended to all industries, the tractor industry despite having an embedded tax rate of 8 pc is not eligible for this relief since tractors were in the exempted category till now.

Tractors like automobiles can be identified by serial numbers and hence exact duty paid (embedded) incurred can be arrived at. Hence, tractors should be treated at par with other products of such nature and should not be discriminated, Srinivasan said.

“The industry always holds more than 1.5 lakh tractors in stock in depots and dealerships, denial of this relief will severely impact the farming community. This is unfair considering that majority of final customers are farmers,” she added.

Ravichandran Purushothaman, President, Danfoss India said, “The GST regime will cause a tectonic shift in India’s taxation history. I foresee transparency in the business chain which will enable significant value creation for the Indian economy and this works well for us at Danfoss as well. While this might require a shift in mind-sets of companies – from the way they do business, to the fact that all channels will have to be digitalised at every stage – the goal is perfection in execution to achieve transformation.” Talking about the impact on power and renewables, he said, “The power sector is likely to see a positive impact. This is largely because of the thermal power sector where coal has been categorised under 5 pc vs a previous 11.7 pc. Additionally, capital goods have been put under the 18 pc slab. This will lead to a reduction in power project development costs. However, it is important to keep in mind the adverse effects on the environment due to coal usage.” He added, “Regarding renewables, given that the tariffs are already low, the power Minister has expressed his opinion that there is no need for lower taxes to encourage clean energy. However, the 18 pc that has been assigned for solar modules is likely to increase project costs by at least 10 pc. There is no clear exemption prescribed to electricity under GST but the hope is that it is brought under the regime.”