On its next meeting on December 18, the GST Council is expected to discuss various revenue-raising measures including review of the tax structure, and an alternative mechanism for compensation cess. Amidst the declining revenue concern, the indirect tax body will deliberate on GST and compensation cess rates levied on select goods, exempted items, and revenue augmentation measures. The secretariat of the GST Council has sought inputs from the state governments on these issues.
The council meeting, expected to be held in the second half of December, will be its first meeting ever in which tax rate increases will be taken seriously into the discussion. At the last GST Council meeting in September, there was an increase in the tax rate on one product, indicating the end of the GST rate reductions era. The proposed meeting in December will also consider measures to improve compliance for taxpayers.
The GST Council has asked tax officials from the state government to come up with suggestions and proposals on GST rates, cess levied on various products and on exempted items, which will be taken up for review at the next meeting. The decision to review these issues at the next meeting comes at a time when GST collections have taken a hit, which tax authorities believe is due to the reduction in tax rates.
The states too had been complaining about the delay in payments of compensation by the Centre as revenues have slowed. With the introduction of the new indirect tax, the Centre had assured to provide the state governments with compensation payout if in case the collection growth was less than 14% a year. The concern of tax leakage and the slowdown in the economy has also added to the government’s woes.