GST Council decides to extend compensation cess beyond June 2022.
Rates may be raised from 5 per cent to 8 per cent and 12 per cent to 15 per cent. The Council can explore possibility of merger of slabs to bring down the number of slabs to three. The Central GST collection fell short of the Budget Estimate by nearly 40 per cent during the April-November period of 2019-20
Other decisions piled up include rationalisation of GST rate slabs, correction of inverted duty on certain items and inclusion of petroleum products.
The mop-up could have been much higher, but tax on imports fell 2 per cent y-o-y.
"At present, there are two main rate slabs under which sa majority of goods are covered -- five per cent and 12.5 per cent -- which will now increase to three (five per cent, 12 per cent and 18 per cent).Will this result in multiple litigations is anybody's guess."
With most states on board to raise revenue so that they do not have to depend on Centre for compensation, the GST Council at its meeting next month is likely to consider a proposal to do away with the 5 per cent slab by moving some goods of mass consumption to 3 per cent and the remaining to 8 per cent categories, sources said. Currently, GST is a four-tier structure of 5, 12, 18 and 28 per cent. Besides, gold and gold jewellery attract 3 per cent tax. In addition, there is an exempt list of items like unbranded and unpacked food items which do not attract the levy.
Ahead of the first meeting of the top decision-making body in nearly eight months, finance ministers of eight states ruled by non-Bharatiya Janata Party and like-minded parties -- Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala and West Bengal -- have devised a joint strategy to press for a zero tax rate on Covid essentials, sources said.
After the 2019 election, one thing is sure: GST will see a number of changes, explains Indivjal Dhasmana.
This may leave those not opting for any of the two options offered by the Centre before the GST Council meet scheduled for October 5 in the lurch. It is clear from the present situation that these states will have to wait till June 2022 to get their compensation, subject to the council extending the cess collection period beyond June 30, 2022.
If the protected growth in GST revenue is reduced to 10 per cent, the Centre would save more than Rs 25,000 crore in 2020-21 if none of the states show any revenue growth. This would nearly amount to 0.1 per cent of the gross fiscal deficit and help the government in avoiding fiscal slippage to some extent in subsequent years.
This is a moment when the leaders at the Centre and states must show true leadership for the sake of the country. And it is the top political leaders, not attorney generals or bureaucrats, who should be sitting together and settling this thorny issue of compensation, says Arvind Subramanian, former Chief Economic Adviser to the Government of India.
The 47th GST Council meeting that is currently underway is slated to discuss a host of issues, including a mechanism for compensating states for revenue loss, tax rate tweaks in some items and relaxed registration norms for small online suppliers. Further, the meeting of the Council, chaired by the Union Finance Minister Nirmala Sitharaman and comprising state counterparts, will also clear levying the highest tax of 28 per cent on online games, casinos and horse racing, besides, measures to curb tax evasion, especially devising ways to tackle high-risk taxpayers in GST. "The meeting is being chaired by Hon'ble Union Minister of Finance @nsitharaman and many important decisions are expected to be taken at the meet," PIB Chandigarh tweeted.
As much as Rs 6,696 crore has been released to the states as GST compensation for the month of March 2018, as on May 29.
The GST Council on Friday left taxes on COVID-19 vaccines and medical supplies unchanged after the BJP- and Opposition-ruled states sparred over whether tax cut benefits will reach the common man. Congress and other Opposition ruled states have been demanding a reduction in taxes but the central government felt the move may not result in tangible gains for people. "It is one thing to rush to say - do this, it will benefit the common man. But when the technical, fitment and law committees go into the details, you realise that that could have collateral impact on many others," Finance Minister Nirmala Sitharaman said. "I am not talking about the revenue generation aspect, but how many other items will get included in it as a result of which how you are going to implement it," she added.
No mention of cab aggregators in GST bills
The GST Council in its next meeting may look at raising the lowest tax slab to 8 per cent, from 5 per cent, and prune the exemption list in the Goods and Services Tax regime as it looks to increase revenues and do away with states' dependence on Centre for compensation, sources said on Sunday. A panel of state finance ministers is likely to submit its report by this month end to the Council suggesting various steps to raise revenue, including hiking the lowest slab and rationalising the slab. Currently, GST is a four-tier structure attracting a tax rate of 5, 12, 18 and 28 per cent.
The GST Council might on Friday consider taxing petrol, diesel and other petroleum products under the single national GST regime, a move that may require huge compromises by both central and state governments on the revenues they collect from taxing these products. The Council, which comprises central and state finance ministers, in its meeting scheduled in Lucknow on Friday, is also likely to consider extending the time for duty relief on COVID-19 essentials, according to sources in the know of the development. GST is being thought to be a solution for the problem of near-record high petrol and diesel rates in the country, as it would end the cascading effect of tax on tax (state VAT being levied not just on the cost of production but also on the excise duty charged by the Centre on such output).
GST compensation law allows for imposition of cess on certain luxury goods like tobacco, high-end cars and aereated drinks to create a corpus for compensating states for any loss of revenue in the first five years
The broad trends of GST collections will make you wonder if indeed the biggest indirect tax reform in the country has led to a real improvement in revenues, notes A K Bhattacharya.
The Centre on Thursday placed before the GST Council two options for borrowing by states to meet the shortfall in GST revenues, pegged at Rs 2.35 lakh crore in the current fiscal.
Kerala Finance Minister KN Balagopal on Friday urged the Centre to provide more fiscal powers to the states as well as increase the shareable proportion of the GST collections. Besides, he asked the central government to expedite approval for the semi-high-speed railway line or the Silverline project from Thiruvananthapuram to Kasargod. The project is mired in controversies.
Compliance requirements, valuation, input tax credit transfers are likely to lead to tax litigation, says Sayan Ghosal.
Can this growth in GST collection be sustained in the coming years? asks A K Bhattacharya.
The clarification comes amid reports that sweet shops have discontinued chocolate barfis and chocolate sandesh.
GST collections in March slipped below the psychological Rs 1 lakh crore-mark for the first time in four months to Rs 97,597 crore as the Covid-19 lockdown that shut most businesses compounded tax collection woes in an already sluggish economy. Goods and Services Tax (GST) mop-up in March recorded a 8.4 per cent decline over March 2019 collection of Rs 1.06 lakh crore. The collections were lower on account of dip in revenues from domestic transactions as well as imports.
The cigarettes segment had a revenue of Rs 4,554.21 crore during the second quarter of the current fiscal, as against Rs 8,528.47 crore in the year-ago period, down 46.56 per cent.
The collections stood at Rs 98,202 crore in the month, against Rs 1.02 trillion in July. The figures indicate continuation of economic slow down which was reflected in the gross domestic product (GDP) growth which plummeted to a 25-quarter low of 5 per cent in the first quarter of 2019-20, experts said.
The Centre on Tuesday permitted 20 states to raise Rs 68,825 crore through open market borrowings to bridge the GST revenue shortfall.
Banerjee asked Modi not to allow "an insufferable blow to the federalist polity of the nation" by depriving the states of the GST compensation. "I am deeply anguished by the Goods and Services Tax imbroglio which tantamounts to a betrayal of the trust and moral responsibility of the Government of India towards the states, violating the very premise of federalism."
'We revolutionised the system in a manner so that the chances of leakage will be much lower than it was in the beginning.'
Retaining the GST rate assumes importance since states are under pressure to increase their revenues, hit hard by lockdown. Also, the Centre has not fully compensated states for their revenue losses on account of GST for 2019-20.
GST Council has also reached consensus on the definition of revenue to compensate states for revenue loss
A future road map could be to work towards a single standard rate instead of two standard rates of 12 per cent and 18 per cent, he said.
Mop up grows 10% y-o-y at Rs 1.05 trillion, almost equal to levels in February before a nationwide lockdown to contain the coronavirus pandemic
The Centre is likely to introduce the Central GST and integrated GST bills in late November or early December in the ongoing session in the form of money Bills.
Reaching a consensus might also get tougher, as already seen with issues like inclusion of natural gas in GST and imposition of a sugar cess, both central proposals being resisted.
Fresh plans of privatisation or divestment in central public sector enterprises and public sector banks might take a back seat this financial year because these may require a large consensus among coalition partners.
So far, 38.38 lakh taxpayers accounting for 64.42 per cent of the total businesses, who had registered in July, filed returns.
Thomas Isaac has been in and out of the national news in his role as Kerala's finance minister since 2018 for various path-breaking tax initiatives. But it is 2020 that he has become more prominent, principally in the GST council.
If there is no third wave of the pandemic, the fiscal position of the Centre and the states will be much better than budgeted for FY22 and the states may garner Rs 60,000 crore more in tax collections at Rs 8.27 lakh crore this fiscal year than they have budgeted, a report said. The report by SBI Research on Monday bases its optimism on GST collection so far this fiscal, which has been the best ever in spite of the fact that the two months bore the maximum brunt of the second wave -- with April setting a record Rs 1.41 lakh crore and May collection a tad low at Rs 1.03 lakh crore. The report also said overall government finances do not look overstretched as GST collections have continued to maintain pace so far and the additional fiscal impact arising from free vaccination and more food supplies will only be around Rs 28,512 crore.
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