The Centre is planning to restructure the Goods and Services Tax (GST) and in this regard will talk to the state governments after the presentation of Union Budget 2021 on 1 February next year, said a news report.
Accordingly, the finance ministers of the Centre and state governments are expected to meet after the Union Budget on 1 February to discuss the overhauling of GST slabs. They are likely to explore ways to manage a possible revenue shortage and GST compensation to the states from the next fiscal reported Mint, citing official sources in the know of the matter.
After the roll-out of the GST, the government had slashed tax rates on several occasions besides giving exemptions, but these measures led to a revenue shortfall. Keeping in view these factors, the talks are expected to find a middle ground to fix the structural flaws, the report said.
As of now, there are four slabs under the GST regime — 5, 12, 18 and 28 percent. The goods and services under the 28 percent category also attract cess over and above the rate, which ranges between 1 and 25 percent.
States against tweaks in GST slabs
In the 18 December GST Council meeting, most of the states had opposed changes in slabs or hike in GST arguing an increase in the levies would have adverse implication for the economy that is facing a slowdown.
The GST Council, comprising state finance ministers and headed by Finance Minister Nirmala Sitharaman, is the highest decision-making body on indirect tax rates.
As there wasn't a consensus, the Council for the first time exercised the option of voting to decide on the GST rate on the lottery as the economy is in a downturn.
State finance ministers also expressed concern over a decline in revenue collection and the delay in payment of GST compensation.
Sources said state ministers pointed out that moderation in GST revenue collection was due to economic slowdown and not because of lower GST rates.
On 18 December, non-BJP ruled states said the Union government might be headed for a sovereign default as it refused to assure them of paying the GST dues on time- guaranteed to them through a Constitutional amendment.
While Union Finance Minister Nirmala Sitharaman reiterated her stand that the Centre was committed to cooperative federalism, finance ministers of non-BJP ruled states such as Punjab and Kerala said the minister refused to give a categorical assurance that states will be paid compensation on time.
On 16 December, two days ahead of the GST Council meeting, the Centre had released GST compensation of Rs 35,298 crore to states and Union Territories after drawing flak from the Opposition-ruled states for the delay.
The delays to pass on the money are due to a slip in collections and the states have nothing to be embarrassed about, Sitharaman had said.
GST revenue collection crosses Rs 1 lakh cr
The GST revenue collection crossed the Rs 1 lakh crore-mark after a gap of three months in November 2019 with revenues growing by 6 percent to Rs 1.03 lakh crore in the month. The GST collection was Rs 95,380 crore in the previous month, while it was Rs 97,637 crore in November 2018.
After two months of negative growth, GST revenue witnessed an impressive recovery with a growth of 6 percent in November 2019 over the November 2018 collections.
This is the eighth time since the inception of GST in July 2017 that monthly collection has crossed the mark of Rs 1 lakh crore.
CGST collections fall in April-November
The Central GST collection fell short of the Budget Estimate by nearly 40 percent during the April-November period of 2019-20, according to government data.
The actual CGST collection during April-November stood at Rs 3,28,365 crore, while the Budget Estimate was Rs 5,26,000 crore for these months.
In 2018-19, the actual CGST collection stood at Rs 4,57,534 crore as against the provisional estimate of Rs 6,03,900 crore for the year, he said.
In 2017-18, the CGST collection was Rs 2,03,261 crore.
In December, rating agency ICRA had claimed that the GST compensation payment of nine select states, including Gujarat, Maharashtra and Kerala, is expected to double to Rs 60,000-70,000 crore in 2019-20.
The timing of the release of such grants by the government of India (GoI) to these states would critically affect their cash flows, ICRA said in a report.
— With PTI inputs
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Updated Date: Dec 30, 2019 13:06:22 IST