GST Council meeting: Rate tweaks unlikely; compensation, falling revenues on the agenda
Compensation to states and revenue shortfall exacerbated by the COVID-19 pandemic are the key discussions expected in the 40th Goods and Services Tax (GST) Council meeting scheduled via videoconferencing on Friday. Some compliance-related relaxation to taxpayers such as late fee waiver are also expected to be discussed in the upcoming meeting, even as any major rate rationalisation looks unlikely, officials said.
The Council is expected to discuss the option of borrowing from the market to meet the compensation requirements arising out of a shortfall in compensation cess collections. The proposal was also discussed in the last Council meeting held in March where the discussions had centred about the legal status of GST Council as a body to undertake any such borrowing and hence no final decision was taken. Any items which are facing inverted duty structure, which means the output having a lower tax rate than inputs, are also going to be looked at, though state government officials say this is not a suitable time to undertake any rate tweaks given the high level of uncertainty.
“There is a high level of uncertainty about revenue flow in the current financial year, so any major rate tweak will have to be considered keeping in mind that revenue also needs to be protected,” an official said.
On Monday, on the need to reduce GST rates in the badly affected sectors Finance Minister Nirmala Sitharaman, while addressing a webinar with FICCI members, had said, “GST rate reduction will go to the Council. But, the GST Council is also looking for revenue. The decision for reduction in rate for any sector has to be taken by the Council.”
The GST Council is also expected to consider late filing fee waiver for returns for July 2017 to January 2020. The proposal along with some other compliance related relief measures are expected. The government had already waived late fee for filing GSTR-3B returns for February 2020-May 2020.
GST revenues have slowed with the total GST collections in FY20 growing by just 3.8 per cent to Rs 12.2 lakh crore. To put this in perspective, states are guaranteed compensation for any revenue loss till 2022 if they fall short of the 14 per cent annual growth since the GST rollout in 2017.
In the current fiscal states’ protected revenue was projected to be Rs 63,720 crore per month from Rs 55,900 crore in FY20. Last week, the central government had released pending compensation payment to states amounting Rs 36,400 crore for November-February for 2019-20.
Indian express
