The exemption would block input-tax credit that would have a negative effect on companies and would not have a direct impact on customers, two finance ministry officials said on Tuesday.
The Cabinet does not approve proposals from industry to substantially reduce the Goods and Services Tax (GST) for a period of six months in order to fuel demand following the Coronavirus Disease (Covid-19) pandemic. The exemption would block input-tax credit that would have a negative effect on companies and would not have a direct impact on customers, two finance ministry officials said on Tuesday.
The input tax credit separates the tax collected on the inputs from the taxes levied on the output of the finished goods. The proposed GST exemption would make the export tax zero, removing the input-tax allowance, which would add to the expense of the finished goods, said officials with direct knowledge of the matter, calling for anonymity. "It would not only hurt the industry, but also the market at large, and this will definitely not boost demand," one of the officials said.
GST is an incorporated indirect tax levy and the primary source of income for both the Central and the State Governments. It makes up almost one-third of the overall tax receipts. Around 70% of GST profits accrue to the Member States as their own share of the proceeds and funds allocated to them by the Centre. SO The GST Regime exception (due to the Covid-19 pandemic) would obstruct the ITC and have a detrimental effect on a company.
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