The GST Council, headed by Union finance minister Nirmala Sitharaman and comprising representatives of all states and UTs, is meeting after a gap of six months. This will take up 25 major issues, including discussion on reports by three groups of ministers, series of clarification, some relief majors for small online suppliers.
Extension of compensation remains a matter of contention between the centre and the state. People aware of the discussion said while the centre is not willing to extend the period of compensation beyond June 30, it may give some relief measures to states with weak revenue growth.
Many opposition-ruled states, especially Delhi, Punjab, Kerala and West Bengal have been pushing for its continuation beyond the five-year period, which is coming to an end on June 30. The opposition ruled states are seeking at least two years of extension, given the fact that many states are still recovering from the blows of the pandemic.
States like Himachal, Punjab, Chhattisgarh, Uttarakhand and Puducherry recorded the steepest negative revenue gap between the protected revenue and post-settlement gross state GST revenue in FY22.
Sources said that while the council is unlikely to go for a major rate overhaul, especially on items of mass consumption, it will tweak rates on a handful of items including increasing tax on tetrapack, while cutting tax on items like orthopaedic implants.
The council will discuss excluding many items and services from the exemption list, as per the recommendation by the GoM headed by Karnataka Chief Minister Basavraj Bommai, as the government is looking at broadening the tax base. The council will decide on the timeline of taking the items out of the exemption list which includes non-branded food items, hotel rooms with tariff below Rs 1,000, among others.
The GoM report, headed by Meghalaya Chief Minister Conrad Sangma on online games, casinos and horse races, has recommended 28% tax on the three items. Members indicate that the council is likely to approve the recommendation.
Procedural reforms and relief to businesses
A group of ministers (GoM) headed by Maharashtra finance minister Ajit Pawar, which is scheduled to give its report on reforms on the GST system to the Council, has recommended public disclosure of information of unregistered bogus traders and provision of information on transactions through Point of Sale (POS) by banks among others.
Council is also expected to extend relief to businesses, including relaxing registration norms for small online suppliers, extension of deadline of filing returns for composite dealers and clarifications on a series of items including Electric Vehicles (EV), on account of conflicting ruling by various courts.