GST Council Meet Earlier Scheduled For Srinagar Starts in Chandigarh, Major Decisions Underway

SRINAGAR: The high-power GST Council that literally manages the entire taxing basket of the states and the central government has started its two-day meeting in Chandigarh. Earlier, it was supposed to take place in Srinagar but the venue was later shifted.

Union Finance Minister Nirmala Sitharaman along with Jammu and Kashmir Lt Governor Manoj Sinha lit a lamp during the inauguration of the new Income Tax Office ‘Chinar’, in Srinagar on Monday, November 22, 2021. KL Image by Bilal Bahadur

“The 47th meeting of the GST Council will be held on June 28-29, 2022 (Tuesday & Wednesday) in Srinagar. @FinMinIndia @GST_Council @PIB_India,” Office of Finance Minister Nirmala Sitharaman had announced on Twitter earlier this month.

Within a few days, another tweet announced the change in venue. “The 47th meeting of the GST Council will be held on 28-29 June, 2022 (Tuesday and Wednesday) at Chandigarh instead of Srinagar,” another tweet said on the last weekend.

No reasons, however, were given for the abrupt change of venue. “Security concerns in the wake of recent targeted killings in Kashmir are learnt to have been one of the main concerns for rescheduling the meeting’s venue, which would have seen the participation of officials and ministers from 31 states/union territories and the Centre,” one newspaper said.

The meeting, however, is very crucial. Apart from the issues on its agenda, the major fault line is that the states are seeking an extension of the GST compensation regime beyond June. The compensation mechanism worked out at the time of the introduction of the GST regime, envisages the central government guaranteeing to pay the revenue losses of the states on account of tax collections. It was for five years starting in July 2017.

The Council had earlier agreed to extend the levy of compensation cess till 2026, but only for repayment of the borrowings made in the aftermath of the pandemic to provide compensation to states. Whether the states are able to manage the compensation from the powerful federal government remains to be seen. Finance Minister Nirmala Sitharaman is presiding over the meeting.

The items on the agenda of the meeting include the elaborate recommendations made by a group of ministers, led by Meghalaya Chief Minister Conrad Sangma. It has suggested a 28 per cent tax rate on casinos, race courses and online gaming. The Council is also expected to decide on a suggestion that hotels renting rooms for Rs 1000 or less may be exempted from the GST. Council’s Fitment Committee has suggested revising the GST rates on a handful of items by proposing a uniform rate of 5 per cent on artificial limbs, orthopaedic implants, and orthoses such as splints, braces, belts and callipers. GST rates on ostomy appliances (including pouch or flange, stoma adhesive paste, barrier cream, irrigator kit, sleeves, belt, and micro-pore tapes. Some of these items fall in the 12 per cent GST category.

However, the compensation issue is said to be very important because the Council members are vertically divided on the issue with non-BJP states insisting it was the only way out for better state management. The last GST council meeting took place in Lucknow in September 2021 in which the issue cropped up but evaded a consensus. Finance Minister had stated that the Council will go ahead with the halt in compensation.

The centre is facing its own crisis on the issue of compensation. The central government raised a debt of Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 to meet its shortfall in cess collection. Though it has paid the interest, the principal amount repayment will start from the next financial year.

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