Political differences came into open at the GST Council meeting on Saturday with finance ministers of opposition-ruled states objecting to rate cut, citing revenue consideration but finally agreeing after a BJP minister proposed that the minutes be recorded and compared with their speeches delivered outside.
Chattisgarh and Rajasthan, where the Congress came to power earlier this month, sent only officers to attend the GST Council meeting, Madhya Pradesh did not send any representative, sources said.
The GST Council after much haggling agreed to cut rates on 23 items of common consumption, which will have an annual revenue implication of Rs 5,500 crore.
Sources said ministers of the opposition-ruled states argued that if a rate cut is to be done at this juncture, then the Centre should agree to compensate states for revenue loss on account of GST implementation for a period beyond the stipulated five years.
Kerala, sources said, said that with revenues not increasing, the time is not right to cut rates.
West Bengal, which had said that it wanted an 18 per cent rate for goods other than luxury and sin goods, in Saturday’s meeting said that this was not the time for a rate cut.
However, BJP-ruled Assam pointed out that all opposition ministers in their speeches say that Goods and Services Tax (GST) rates should be lowered to 18 per cent from 28 per cent, but participating in the GST Council deliberation they oppose rate cuts.
The BJP minister demanded that the position taken by all the state ministers in the Council meetings be put in the minutes of the meeting so that it can be compared with their public speeches in future.
Finance Minister Arun Jaitley is understood to have intervened to say that only the views expressed by ministers during the Council meeting should be taken into consideration.
Sources said state ministers finally agreed to discuss and go by the suggestions made by the fitment committee or officers committee on rate cut.
The GST Council, chaired by Union Finance Minister and comprising his state counterparts, Saturday decided to cut rates on 23 goods and services, including movie tickets, TV and monitor screens and power banks, and exempted frozen and preserved vegetables from the levy. The reduced rates would be applicable from January 1, 2019.
In the first eight months (April-November) of the current fiscal, the government has mopped up over Rs 7.76 lakh crore from GST. The 2018-19 budget had estimated annual GST collection at Rs 13.48 lakh crore, which means a monthly target of Rs 1.12 lakh crore.
Briefing reporters after the Council’s meet, Jaitley said the average monthly revenue under GST has risen from Rs 89,000 crore in the last fiscal, to around Rs 95,000-96,000 crore in the current fiscal.
Also compensation to be paid to the states has come down in the current fiscal.
He said a Group of Ministers would be set up to study the data of those states which are not showing improvement of revenues post GST implementation. The GoM would take expert assistance from NIPFP.
States which have shown improvement in tax collection included Andhra Pradesh, Uttar Pradesh, West Bengal and Tamil Nadu while laggard states included Punjab, Himachal Pradesh and Uttarakhand.
Also while consuming states like North East have shown improvement in revenue, manufacturing and consuming states like Maharashtra and West Bengal have shown significant improvement.