The Goods and Services Tax (GST) Council, entrusted with overseeing the seven-year-old indirect tax regime, is slated to meet on September 9. This would be its second sitting in under three months, after a nine-month pause. The Council, whose parleys steered by the Union Finance Minister with States’ representatives are critical for resolving taxpayer challenges and setting broader policy direction, ought to meet regularly at such frequency. A key expectation from the upcoming meet revolves around the much-awaited review of GST’s complex, multiple-rate structure. In June, the Council resolved to take stock of the progress made on this front by a ministerial group (GoM) appointed in 2021, and deliberate on the path forward. However, going by State Ministers’ recent submissions to the GoM, progress is likely to be slow and arduous, with most members signalling an aversion to shake things up when revenues are healthy. Ideally, the Council should at least set a time line for concluding the group’s deliberations and nudge it to come up with a couple of alternatives for the revamped rate structure if consensus is difficult to attain. These could then be deliberated over by the Council, possibly with some public feedback incorporated. Beyond the broader revamp, the Council could also be briefed this time on the feasibility of reviewing the 18% GST levy on individual goods and services such as health insurance and life cover, that have attracted attention recently within and outside Parliament. These have been assessed by officials in the past too, without resulting in any change in stance.
The inclusion of items such as electricity, petroleum and alcohol into the GST net, something that industry and economists have been advocating for years, may be even more tricky. States gave up a lot of taxation power for the GST’s rollout, and are unlikely to be amenable to yielding further space, particularly as quite a few States’ ties with the Centre are “acrimonious”, as former Chief Economic Adviser Arvind Subramanian recently pointed out. While it will be instructive to see the direction the Council takes on these issues, greater monitoring of the nitty-gritty of GST’s day-to-day functioning is needed as well. Revenue trends remain healthy with about 10% growth this fiscal but the pace of refunds to taxpayers has been unusually uneven. Net GST receipts rose under 7% in three of the last five months, but jumped about 15% in months when refunds dropped sharply. The Council must not overlook such details, though they may seem relatively obscure in the bigger picture. This could help prevent ungainly twists for industry, be it registration or refund challenges, or the spectre of confusion created by recent large tax demands on IT majors.
