Measures to plug tax evasion, a review of revenue positions of states and the Centre and a uniform rate for lottery amid a clamour for rate cuts by crisis-hit sectors would be the key discussions in the 37th Goods and Services Tax (GST) Council meeting to be held on Friday. A fitment committee, consisting of officials from states and the Centre, has already recommended against the lowering of GST rates on various items such as automobiles, biscuits as any cut at this stage could further dent the already slowing revenues.
The panel, however, is learnt to have supported reduction of 28 per cent GST rate for hotels with tariff of Rs 7,500 and above. It has also alternatively suggested raising tariff ceiling to Rs 10,000 while retaining the same tax slab of 18 per cent. At present, 18 per cent GST rate is applicable for hotel tariff from Rs 2,500 to Rs 7,500 per night.
Revenue concerns would play a major determinant in any rate related decision, officials said. “Plugging revenue leak and a review of revenue position, including compensation cess, is important at this stage,” an official said.
As the authorities will focus more on revenue protection, the Council is expected to discuss the modalities for sharing of data of offences amongst Centre, states and various other agencies. Measures to undertake risk-based profiling of risky taxpayers in an automated manner will also be discussed in the Council meeting. Also, some relief for filing of the annual GST returns could be provided to smaller taxpayers with annual turnover up to Rs 2 crore.
Revenue collections for both direct and indirect taxes are weakening, reflecting the impact of overall slowdown in the economy. In August, GST revenue collections stood at Rs 98,902 crore, 4.5 per cent higher than last year’s mop-up, but were the lowest in the 2019-20 fiscal so far.
Amid slowdown, shrinking revenue stream a concern
As the economic slowdown has weakened growth for many sectors, representations for tax rate cuts have been made to the government, especially from the stressed auto sector, for an aid for their revival. The GST Council, a federal body having members from Centre and states, will meet on Friday and discuss the rate cut proposals though fitment committee has already suggested against any major rate cut. With economic slowdown affecting revenue stream, revenue concerns would be the critical factor for determining any GST rate cut in the Council meeting.
An estimated revenue loss of Rs 50,000 crore per year is what made the fitment committee recommend against any rate cuts for automobile sector. The committee has also recommended against any rate reduction on biscuits priced at Rs 100 per kg or below from the current 18 per cent.
The Committee has also recommended against the telecom ministry’s proposal to reduce GST rate for telecom services from the present 18 per cent to 12 per cent along with maintaining status quo for bakery products, breakfast cereals, fruits and vegetables, mineral water, ready-to-eat packaged items, and several other food products.
States have already expressed their concerns regarding cut in GST rates and the revenue loss associated with them. Many are concerned that further rate cuts would result in enhanced compensation requirement, which won’t be easy to come by, especially in view of slowing revenue trend.
A uniform rate on lottery is expected to be discussed in the meeting as the legal view would be mulled over. The Council earlier this year had decided to seek legal opinion of the Attorney General for levying GST on lottery. A Group of Ministers (GoM) on issues related to lottery under GST regime had earlier favoured a uniform tax rate of either 18 per cent or 28 per cent from the current rate of 12 per cent for state-run lottery and 28 per cent for state-authorised lottery.
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