THE GOODS and Services Tax (GST) Council went in for a vote on the issue of imposing a uniform tax rate of 28 per cent for both state-run and state-authorised lottery on Wednesday — the first instance of voting in the 38 Council meetings held so far.
Till now, all decisions at the GST Council were taken through consensus — a tradition which was challenged by Kerala’s Finance Minister Thomas Isaac at the meeting, where a showdown between the Centre and states on delayed compensation payments was anticipated.
After the meeting, Union Finance Minister Nirmala Sitharaman, who heads the Council, said “every attempt was made to keep that set tradition alive, every attempt was made to convince based on opinion making in the house”. But, she said, the Council was reminded that the “rules allow and that tradition was not part of the rulebook”, and voting was held on the “request of one member”.
“We went ahead with a decision to have a vote. So it’s not imposed by the Council, it’s not imposed by me as the Chair, but it was on a request from one member,” she said.
A total of 21 members of the GST Council voted in favour of a uniform rate for lottery effective March 1 next year, 7 against it (including Kerala, Chhattisgarh, West Bengal, Madhya Pradesh, Maharashtra, Puducherry), while 3 members abstained, said officials.
As per the voting rules for the Council, every decision has to be taken by a majority of not less than three-fourth of the weighted votes of the members present, with the vote of the central government having a weightage of one-third of the total votes cast, and votes of all the state governments together having a weightage of two-thirds of the total votes cast.
Former Finance Minister Arun Jaitley had earlier said the GST Council was an excellent federal institution in which thousands of issues were decided through consensus.
Revenue analysis and revenue augmentation measures weighed strong in the meeting, even as the Council did not undertake any substantial tinkering of rates. Opposition-ruled state finance ministers said compensation cess would see a shortfall after February next year, adding that they were not assured of any timeline for future payments by the Centre.
Punjab Finance Minister Manpreet Singh Badal said the “Union Finance Minister could not give assurance on whether states will be paid on time or not”. “We were aware the revenue position was grim, but we were not aware that it was grim to an extent where the Union Finance Minister could not give assurance in the Council whether states would be paid on time or not… As far as I am concerned, I think it is just close to a sovereign default where the Government of India is unable to pay its constitutional obligation,” Badal said.
Delhi’s Deputy Chief Minister and Finance Minister Manish Sisodia said they asked the reason for delayed compensation payments despite a balance of over Rs 40,000 crore in the compensation fund, but were not given any answer. He said every state said that changing slabs and rates would be a knee-jerk reaction, and the Council should opt for plugging loopholes in the GST structure for augmenting revenues.
Kerala Finance Minister Thomas Isaac said the Centre had sufficient money in the compensation fund, but had delayed payments since August. “It is a great disappointment that they are not even able to assure that they will give us our dues,” he said.
West Bengal Finance Minister Amit Mitra said there would be no compensation money after February, while Bihar’s Deputy Chief Minister Sushil Kumar Modi said rate hikes were not a solution in the time of a cyclical slowdown.
A presentation was made by a committee formed for revenue augmentation, comprising officials from both the Centre and states, which suggested ideas, including a possible rejig of slabs going ahead. Referring to the proposals on raising rate for GST slabs, Sitharaman said it was an analysis made by the officials’ panel, adding that it was a “first rough cut” on the revenue position and various related scenarios.
She said the states asked for more data analysis. “One state said analysis of data on, say, edible oil be compiled on consumption post-rate cut. Some states wanted a complete compilation on items on which rates were reduced,” she said.
The GST Council has decided to restrict availment of input tax credit to 10 per cent of the eligible credit for businesses if invoices are not uploaded by the taxpayer’s suppliers in GSTR-2A, from 20 per cent decided last month. This has been done to block fraudulent availing of input tax credit in certain situations, an official statement said.
The Council has also extended the last date for filing annual return GSTR-9 and GSTR-9C for 2017-18 to January 31, 2020 from December 31, 2019. It has decided to waive the late fee for filing GSTR1 from July 2017 to November 2019 if all returns are filed by January 10, 2020.