Leasing sector growth may get affected due to high GST: FIDC

The leasing sector’s share in India’s gross domestic capital formation is below 2%.

The Dollar Business Bureau

Due to higher rates of Goods and Services Tax (GST) along with some other issues, the growth of capital good leasing sector, which is growing at 15-20% may get tapered, said the representative body-cum-self regulatory organisation for NBFCs, theFinance Industry Development Council (FIDC).

The capital good leasing sector in India is estimated to be worth Rs.5500 crore.

“The GST rate of 28% is high for the leasing industry when compared to the earlier 5-15% tax burden. Higher GST rates lead to requirement of higher working capital at any point of time. This results in increasing the cost of leasing an equipment,” Mahesh Thakkar, Director General, FIDC told PTI.

He urged the Government to actively consider not putting the capital goods in the similar GST rate category as that of sin goods and luxury goods, while adding that lower rate of GST will help in enhancing the contribution of leasing sector in gross capital formation.

The leasing sector’s share in India’s gross domestic capital formation is below 2% while the world average is 10%, he said.

“The same could also create hurdles for the foreign companies in India since they believe that leasing is the most preferred method of owing assets for operation,” said an NBFC official.

Besides GST, there are some other issues which need to be revised such as input tax credit, repossessed assets sale and penal charges/interest for delayed remittance of EMI.

“So far there is no reply from the Government on our representation,” he said.

Both the officials pointed out that these issues will have a severe effect on the already capital-starved small and medium enterprises (SMEs) who have to face major hurdles due to this.

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The Dollar Business Bureau - Aug 16, 2017 12:00 IST