What is the projected annual revenue loss from auto tax cuts?

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Projected Annual Revenue Loss from Auto Tax Cuts

A government study has indicated that a potential reduction in tax rates for India's auto and allied components sector could result in an annual revenue loss of up to 500 billion rupees (approximately RM29.2 billion). This projection is a significant factor influencing the GST panel's consideration of lowering the tax rate from the current 28 per cent to 18 per cent. The study's findings are attached to the agenda for an upcoming GST panel meeting.
Opposition to Tax Rate Reductions

Several state officials have expressed opposition to any reduction in tax rates for the auto sector, as well as for consumer goods. This stance is primarily driven by concerns over lacklustre tax collections observed during the current fiscal year. For instance, total tax revenues for 20 Indian states in the April-July period showed a 7 per cent decrease compared to the same period last year, amounting to 4.9 trillion rupees.
Impact on Specific States

The revenue shortfall has disproportionately affected certain states. Data reveals substantial declines in tax collections in Andhra Pradesh, Rajasthan, and Punjab, which experienced drops of 59 per cent, 35.5 per cent, and 12.5 per cent respectively. The finance minister of Kerala, Thomas Isaac, explicitly stated his opposition to any rate cuts, deeming them not to be revenue neutral.
Auto Sector's Push for Relief

The auto sector, which has been experiencing its most severe downturn in almost two decades, has been advocating for a reduction in GST rates. The primary objective behind this push is to stimulate vehicle demand and alleviate the ongoing slump. The GST panel, comprised of the federal finance minister and all state finance ministers, makes decisions through voting.

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What is the projected annual revenue loss from auto tax cuts?

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