NEW DELHI: The 42nd meeting of the federal tax body, the Goods and Services Tax Council (GST), is underway via videoconference, primarily to discuss how to fill the deficit in state tax revenue. Mint takes a look at the key issues on the table.
What is Monday’s Council meeting about?
The Council will attempt to reach a decision on allowing states to borrow beyond their already improved borrowing limits to cover the shortfall on their GST receipts. The options are to address the revenue shortfall that arises from the 2017 indirect tax reform or to save your entire GST revenue shortfall that covers the impact of the pandemic, in different terms. Breakaway states such as Kerala, Punjab, West Bengal and Delhi are expected to propose other options.
What do the dissident states want?
States that oppose the borrowing options proposed at the last Council meeting in August have rejected the distinction between lost revenue due to the 2017 tax reform and what is caused by the pandemic. They expect the Center to borrow and repay them. Kerala, Punjab and Delhi have requested a dispute resolution mechanism to handle such differences. However, such a mechanism has not yet been established, provided for in the Constitution through Amendment 101 of the 2016 Constitution.
Is the central government in a position to borrow and compensate for the states’ fiscal deficits?
The Center is facing a significant decline in tax revenue and has increased its loans by approximately 54% to ₹12 billion for this prosecutor. You cannot cover the deficit in the compensation requirement of ₹2.35 trillion from its own resources, as its gross tax revenue for April-August was only ₹5 trillion. The only option is for the Center and the states to develop a formula for borrowing.
What are the implications for consumers?
The GST income gap can be closed by borrowing or increasing taxes on items such as petroleum products and spirits that are outside of GST. However, there may be a limit to these alternative tax measures, especially for auto fuel. The additional loan to be made will be paid by extending the GST tax on items such as automobiles, tobacco and carbonated beverages beyond 2022. Consumers must bear the tax for a longer period.
What other topics are on the table?
The Council is expected to consider suggestions from a ministerial panel to disburse the integrated GST due to the states for fiscal year 2018, as well as a proposal to exempt the satellite launch services of ISRO, Antrix Corp. and New Space India Ltd from GST, BloombergQuint reported Sunday. .
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