GST Council Meeting: Multiple States Press For Clarity On Potential Revenue Loss
Karnataka, Punjab and West Bengal are among the states seeking stronger measures for revenue protection in view of the planned GST overhaul, sources said.
On the first day of the highly anticipated GST Council meeting on Wednesday, an array of states raised apprehensions over the potential revenue loss due to lowering of tax rates as part of the restructuring of the GST slabs, sources told NDTV Profit.
The states that sought clarity from the government on the revenue impact include Karnataka, Punjab, West Bengal, Telangana, and Sikkim, the persons privy to the development said.
These states have demanded stronger measures for revenue protection in view of the planned GST overhaul, the persons added.
The GST Council, whose two-day meeting will conclude on Thursday, is deliberating on the proposal to overhaul the current GST structure into only two slabs — 5% and 18%. If accepted, this will lead to the removal of 12% and 28% slabs, thereby reducing the tax rates on various items.
This proposal was made by the group of ministers, led by Bihar Deputy Chief Minister Samrat Chaudhary, before the GST Council. As per sources, the proposal was also made for an additional 40% tax on select luxury and 'sin' goods.
States so far have publicly not objected to the central government's planned GST overhaul, as the reforms are primarily designed to benefit consumers. The final shape of the tax reform is expected to be determined by the compromises reached during the meeting.
GST, the biggest overhaul of India's indirect tax regime, was first rolled out in 2017. Since then, states are provided with compensation cess to make up for the losses they incurred.
Notably, one of the group of ministers, led by Union Minister of State for Finance Pankaj Chaudhary, has proposed before the GST Council to replace compensation cess with a separate levy or to subsume it under the GST rates, sources told NDTV Profit last week.
The ministerial panel sought the implementation of this proposal by October. If accepted, this would mark an early phase-out of cess, which is currently set to continue till the end of this fiscal year.
