The vexed issue of compensation to states could figure at the meeting of the GST Council on Tuesday. Several Opposition-ruled states have been demanding the Centre continue to compensate them as the revenue buoyancy under GST has been much less than promised — the bait that drew them to the indirect tax regime in the first place.
Finance ministry officials expect some state finance ministers to raise the issue in the time allotted to them during the discussions, though it is not officially on the agenda. Sources said Kerala and Chhattisgarh could speak on compensation as they continue to lose revenue.
When the goods and services tax (GST) regime was introduced in 2017, the Centre had guaranteed the states it would ensure their revenues grew 14 per cent for five years by levying a cess on some luxury items.
Though the Centre stopped paying the compensation after June 2022, the Council in September 2021 agreed to extend the cesstill March 2026 to service the loans taken on account of a shortfall in revenue collections.
The Centre had borrowed Rs 2.69 lakh crore in 2020-21 and 2021-22 when collections dwindled after the pandemic and passed the sum on to states to partly meet their shortfall in GST collections.
Officials said the Council should start deliberating on whether to continue collecting the cess beyond March 2026 and if so, how to share it with the states.
The 50th meeting of the GST Council on July 11 is expected to take a call on a host of issues ranging from the tax on online gaming and the tax rejig on non-fried snacks such as papads to levies on multi-utility vehicles and the exemption of GST on the import of certain cancer drugs.
In online gaming, a group of state finance ministers had left it to the Council to decide whether GST should be levied at the rate of 28 per cent on the full face value of bets or gross gaming revenue.
In non-fried snacks such as papads and kachris, which are taxed at 18 per cent, the proposal is a full exemption or 5 per cent GST.
The Council is likely to exempt tax on cancer medicine Dinutuximab, which is imported by individuals and attracts a 12 per cent levy. The GST fitment committee has recommended exemption for the medicine which costs Rs 36 lakh as patients and families usually raise money from others to buy the drug.
The Council may clarify whether the supply of food and beverages at cinemas is taxable at the rate of 5 per cent and not 18 per cent aswas being done in some multiplexes.
The meeting is also likely to clarify the tax treatment on multi-utility vehicles (MUV) or crossover utility vehicles at par with sports utility vehicles (SUVs).
The long-pending proposal of a GST appellate tribunal to resolve disputes between the taxpayers and the authorities is up for discussion.
Compliance gains
The increased focus on compliance over the last two years has been given as a reason for the rise in average monthly collections to Rs 1.7 lakh crore in 2023-24 from Rs 1.2 lakh crore in 2021-22.
The collections rose 12 per cent to over Rs 1.61 lakh crore in June. The revenues had touched a record high of Rs 1.87 lakh crore in April; in May, it was Rs 1.57 lakh crore.
