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The Tractor Manufacturers' Association (TMA) has indicated that the proposed GST rate of 28 per cent for tractor components would lead to an increase in input cost by ₹25,000 per tractor.
The Association has requested the government to reduce the duty for all tractor components to 18 per cent from 28 per cent.
The 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 per cent.
Tractors that hitherto had nil final duty will now have a GST of 12 per cent. TMA has requested changing component duties in tractors from the proposed 28 per cent to 18 per cent. Unfortunately, this has only been partially rolled out as of now.
Some tractor components were included in the list of 66 items for which the Finance Minister announced a revised GST rate of 18 per cent.
However, it is observed that in implementation, with the inverted duty structure of input tax of 28 per cent and output of 18 per cent, the relief provided is marginal and the input cost per tractor would go up by about ₹25,000, having an impact on industry working capital to the extent of ₹1,600 crore, according to a statement of TMA.
“We are requesting the revenue department to reduce duty on all components that go into the manufacture of tractors such as engines, transmission, axles, center housing, front and rear tires and tubes and other parts from 28 per cent to 18 per cent, upholding the statement of the finance minister in letter and spirit,” Mallika Srinivasan, Chairman & CEO of TAFE said.
In addition to the above, 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 eight per cent, is not eligible for this relief because tractors were in the exempted category till now.
Tractors like automobiles can be identified by serial numbers and hence the 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.
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, the statement pointed out.
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