Gujarat seeks tax exemption on Governor's BMW, GST Council rejects

GST Council rejects tax exemption plea for the imported luxury car

The Goods and Services Tax (GST) Council on Friday not only disappointed the automobile industry by not cutting rates but also the Gujarat government, which had sought GST exemption for a BMW purchase. The state government had imported a BMW high-security vehicle for use by Acharya Devvrat, who took over as governor in July.  

The Council went by the fitment panel’s recommendation that no special treatment could be extended to the Gujarat governor for importing a luxury car worth Rs 2 crore.  

“The fitment panel made it clear that no retrospective exemption could be given for the car and that specific exceptions would create distortion,” an official in the know said. 

The fitment panel, comprising state and central officials, examines representations from industries and states for rate reductions. These recommendations are then put up to the GST Council for a final decision. 

The Gujarat government had sought retrospective exemption from integrated GST (IGST). If allowed, the state government could get back Rs 95 lakh IGST that it had already paid.   

At the time of import, the BMW vehicle enjoyed basic customs duty exemption, allowed as part of a governor’s allowances and privileges. However, no such exemption was allowed in the case of IGST by the GST Council. 

The matter was clarified to the Gujarat government at the time of import itself, an official pointed out. 

The fitment panel had also rejected any rate cut for the auto sector, suggesting that the move would not only entail a huge revenue implication, but also that the slowdown could be attributed to a host of other structural and cyclical factors. 

The panel pointed out that liquidity crunch, the NBFC crisis, regulatory changes like axle load increase, emission standard change from BS-IV to BS-VI and efficiency gains due to GST implementation could also explain the motown’s demand slowdown. It further added that reduction in rates on motor vehicles may not necessarily mean the same for auto parts and components.

Despite a push from Road and Transport Minister Nitin Gadkari, the fitment committee turned down the request for a rate cut on hybrid vehicles, saying that they already had a tax advantage of 5 per cent over a normal large-segment internal combustion engine vehicle.

What's the case

• Gujarat govt imported a BMW high-security car, worth Rs 2 crore, for use by the governor

• State govt later sought retrospective exemption from integrated GST

• Fitment panel clarified no retrospective exemption could be given for the car, arguing specific exceptions would create distortion

• GST Council upheld the panel’s recommendation

• If allowed, state govt could have got back Rs 95 lakh IGST