India’s GST Council, the apex decision-making body of the indirect tax regime that completes five years this week, is meeting in Chandigarh on June 28-29. Finance Minister Nirmala Sitharaman, state finance ministers, other ministers and senior officials congregate at a top hotel to start deliberations on several key issues.
Here’s a primer on what you can expect from the meeting.
Tussle for GST compensation
Although the Centre is not in favour of extending the GST compensation to states beyond the deadline of June 30 this year, several states are expected to demand an extension for a few years at the GST Council meeting. Note that the levy of the GST compensation cess on certain sin and luxury items has already been extended to March 2026 to make up for the borrowings that bridged the compensation shortfall over the last couple of financial years. This means that there is very little scope for compensation to states to be extended. At the same time, fiscally strained states have few other options to raise revenues. Expect verbal fireworks at the sidelines of the meeting.
Minor rate tweaks
The current inflationary environment will prevent both the Centre and states from voting in favour of any major GST rate increases, and a panel on GST rationalization may even get more time to firm up its final report. Meanwhile, tax rates on casinos and fantasy sports may be firmed up at the peak rate of 28 percent, while the list of exemptions could be pruned. Some more goods and services may also make the final list. Wait and watch.
Systemic changes to boost revenues
The GST Council does not have its hands tied when it comes to making systemic changes to boost compliance and revenues. Crucial steps like verification of returns and improved surveillance of high-risk taxpayers will yield returns for both the Centre and states. Such proposals will see easy passage in this meeting.
Will states deviate?
In the wake of a recent Supreme Court ruling, a lot has been said on how states are now free to go their own way, deviating from GST Council’s resolutions. However, this is unlikely to be the case anytime soon, especially at this meeting, as it is the Centre and states’ compact that has held the indirect tax system together over the half a decade since its inception. There could be some hue and cry. But remember, by and large, the GST system has worked for all and nobody would want to jump ship.