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GST Council to meet next month; FinMin not for raising rates on non-essential items

The nationwide lockdown was announced by Prime Minister Narendra Modi on March 24 for 21 days in the first leg in a bid to contain the spread of novel coronavirus.

May 29, 2020 / 06:31 PM IST

The finance ministry is not in favour of increasing goods and services tax rates on non-essential items in the next month's meeting of the GST Council, despite depressed revenue collections due to the nationwide lockdown to contain the spread of COVID-19. If goods and services tax (GST) rates are increased on non-essential items, sources said it will further bring down their demand and impede the overall economic recovery.

Post the lockdown, the demand has to be induced and economic activity has to improve on all fronts, not just on essential items side, they said.

However, the decision will be taken by the GST Council headed by the finance minister, according to sources.

Rates will come up for discussion during the council meeting next month to be attended by state finance ministers, they added.

The 39th meeting of GST Council was held in March, which proposed rationalisation of taxes on many items.


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The nationwide lockdown was announced by Prime Minister Narendra Modi on March 24 for 21 days in the first leg in a bid to contain the spread of novel coronavirus. It was then extended till May 3 and then again till May 17. The fourth phase of lockdown is in place till May 31.

The lockdown has led to a major shrinkage in GST collections. The government deferred the release of April GST revenue collection data due to the lockdown.

The government had last month extended the deadline to file GST returns for March to May 5, from April 20.

As per convention, the government releases GST revenue collection number on the basis of cash collection in a particular month. However, with the situation arising out of COVID-19, the government has decided to wait till the extended deadline for filing returns before release of the collection figure.

Sources further said that the government has not taken any call on monetisation of deficit at this point of time to shore up its resources.

Nobody knows how this COVID-19 pandemic pans out, what shape it is going to take, what kind of impact it will have on the Indian economy, and globally also no country knows today what lies three months later, sources said.

As of now, the government has increased the borrowing limit from Rs 7.8 lakh crore to Rs 12 lakh crore, which is Rs 4.2 lakh crore higher than the Budget estimate.

The RBI's monetisation of the fiscal deficit broadly means the central bank printing currency for the government to take care of any emergency spending and to bridge its fiscal deficit — this action is resorted to under emergency situations.

Sources, however said, there is a need to bring down cost of borrowing for the government in the given situation.

As a result of this, the government has to withdraw 7.75 per cent Savings (Taxable) Bonds scheme from the close of banking business on Thursday.

The scheme, commonly known as RBI Bonds or GOI bonds, is popular among retail investors who look for safety of principal and a regular income. NRIs, however, are not eligible for making investments in these bonds.

On issues pertaining to labourers with regard to wages and opportunities, sources said the finance ministry has initiated talks with the Labour Ministry on job losses and salary cuts due to the lockdown.

The Labour Ministry will engage in talks with the states on the issue, they added.

Follow our full coverage of the coronavirus pandemic here.
first published: May 29, 2020 06:28 pm
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