Sat. May 21st, 2022

GST Council Meets and Its Proposal

GST Council Meets and Its Proposal

The recent revision in the rates of over 50 products and services and a brief discussion on introducing national gas, electricity and petroleum products into the ambit of a national tax is also on the table of the GST Council meetings. But, the meet is likely to dedicate only a small amount of time to that of compensation for states for revenue loss resulting from the GST regime imposed by the federal government. Finance Minister Thackeray has offered the ministries of finance, administration and transport $1.5 billion as compensation for the damage caused to the economy due to the introduction of the GST. This is only a small amount compared to the revenue loss, which occurred because of the introduction of the GST.

The question that should be resolved in the meeting of the GST Council is whether the central and state governments should work together to reduce the disbursement of taxes or not. If the answer is in the affirmative, then the states will have every reason to support the cause of the GST Council. On the other hand, if they are not in favor of working in concert with the centre and state government, then they will have every reason to complain that the GST Council has not consulted them before imposing the new tax. A few states have already voted in favor of banding together with the Centre in opposition to the GST. These states are Andhra Pradesh, Tamil Nadu, Kerala, Karnataka, Pitampura and Telangana.

It is seen that the first meeting of the GST Council will be held after the end of April and the process of adoption of the new system of indirect tax collection will begin after the next meeting of the Association of Collectors of Great Britain. The Association of Collectors comprises of British antique, furniture, jewelry, pottery and ship dealers. The reason behind this decision of the association is that they do not want their collection items to be affected by the changes made in the indirect tax system. One thing that can be understood from the coming meeting of the 43rd GST Council Meet is that all states in India will be working under a single system of tax collection.

According to estimates, around Rs 48 billion is spent on fuel and oil in India. At the end of April, the new indirect tax system will be introduced for the petrol and diesel, and the rates of these commodities will go down. According to a report by Citi group, the rates of petrol and diesel will come down by about five percent in the next three years, and this will be inclusive of the central taxes like the Value Based Premium and the Excise Tariff. There will not be any changes in the tariffs for the petroleum products.

Earlier when the revised GST came into force, all the states had implemented it according to their own rules and regulations. But now with the help of GST Council Meetings, states have started considering and analyzing the new indirect taxes imposed on the petroleum products. After the analysis and discussions, the states have decided to adopt a uniform tax rate for all the petroleum goods, and are planning to implement the same for the supply made within their states. This will bring down the taxation rate on petroleum products to five percent. However, all the states are considering the tax rate at eighteen percent, and the others are planning to adopt the rate closer to twenty-one percent.

In the Council meetings, states have discussed the impact of the GST on their revenue generation, and the revenue loss that would occur if the tax were to be implemented. The revenue loss comes from the indirect taxes on petroleum and other petroleum based products such as the petroleum gas. These taxes account for about eighty percent of the total revenue of the states. According to an estimate, about one billion dollars worth of revenue will be generated through the new tax regime, which will be beneficial to all the states in terms of revenue generation.

Now, the Finance Minister of a state can suggest any reasonable tax rate, which will suit the revenue needs of his state. According to him, each state should adopt the rates including floor rates including special rates for the petroleum goods for which they are required to purchase the quota of goods, at the special prices. If the Finance Minister of a state can propose such a tax rate, it is bound to go through the Council Meeting and will become a permanent policy. This is important for the development of the economy of the country.

In this way, the state government will be able to attract the business and increase the revenue of the state. Now, the finance minister of a state can also talk about the availability of the quota of goods in the special rates in terms of goods and commodities that is not purchased by the states in the federal market. He can assure that the demand in the federal market is not going to drop, and the demand in the national market is going to increase. This is how the finance ministry gains support of the states to adopt the GST Council Meeting’s decision.