No more compensation: Centre likely to tell states at GST Council

The central government is likely to tell states at the next meeting of the Goods and Services Tax (GST) Council that the buoyant GST revenue trend shows that states no longer need funds from the Centre as compensation for the 2017 indirect tax reform, reports Mint. The next GST Council meeting is expected to be held this month.

The Centre is expected to tell states that 20 per cent growth in GST revenue collections in April was more than states’ protected revenue growth rate of 14 per cent backed by GST compensation from the Centre. Also, large state economies such as Maharashtra, Uttar Pradesh, Rajasthan, Haryana, and Gujarat have recently had strong revenue collections, the Mint report said.

Also read: Haryana, Odisha, Maharashtra among states with high growth in GST mop-up

State governments have been demanding GST compensation beyond June 2022. However, they do not see the possibility of the Centre extending the compensation payments, said a state government official, who also spoke on condition of anonymity, the report said.

GST rate rationalisation

A group of ministers led by Meghalaya chief minister Conrad Sangma is examining the feasibility of imposing a 28 per cent GST rate on tax casinos and race courses, as well as online gaming. These firms are paying 18 per cent GST backed by court orders in the absence of clarity on the subject. Businesses claim these are games of skill rather than that of chance.

Policy makers are also working on a clarification that is needed on the applicability of the federal indirect tax on certain types of cryptocurrency transactions that are neither in the nature of goods nor services.

Another ministerial group is examining proposals for GST rate rationalisation, but it remains to be seen whether the GST Council will take these up in the near future given the surging inflation.

Also read: GST revenues at all-time high of Rs 1.68 lakh-crore in April