Work in progress: On the GST Council meet and issues

The 50th GST Council meet lifts the fog on many areas; execution holds the key 

July 14, 2023 12:20 am | Updated 08:20 am IST

Meeting after nearly five months, the Goods and Services Tax (GST) Council on Tuesday unravelled some knotty issues that were hanging fire for a long time, such as the constitution of Appellate Tribunals and the tax treatment for the booming online gaming industry. With the appointment norms for tribunal members cleared, the Centre has given an assurance that the first set of tribunals should become operational in four to six months. While States have proposed 50 tribunal benches, these will come up in a phased manner, beginning with State capitals and cities with High Court benches. Industry may hope for quicker redress of mounting GST litigations clogging up courts. On the other hand, businesses have reacted with much consternation to the Council’s decision to finalise a 28% GST levy on the face value of all bets placed in online games, casinos or horse-racing, with many e-gaming players terming it a death knell for the growing industry and its thousands of jobs. This was not a hasty decision, having been considered by a ministerial group of the Council not once, but twice since its formation in late 2020. Finance Minister Nirmala Sitharaman said the Council acknowledged that Goa and Sikkim rely heavily on casino-driven tourism revenues, but also examined the moral question of whether this can be equated to the more compassionate tax treatment warranted for essential goods and services. With the Electronics and IT Ministry also formulating a policy for online gaming, this decision, requiring an amendment to the GST law, may yet need some review and fine tuning.

The Council also granted tax exemptions, reduced or clarified some rates and regularised past incongruencies in tax payments on some items owing to confusion about their classification. So, food and beverages in cinema halls will now attract a lower 5% GST, as would unfried, uncooked snack pellets, fish soluble paste and imitation zari yarn. It is not clear why the Council took six years after the GST regime’s launch to tweak these rates. Exempting drugs imported for cancer and some rare diseases, for instance, could have been envisaged earlier as well, just as the intended higher tax levy on sport utility vehicles could have been. Dissuading the use of larger personal vehicles is an obvious necessity for a country where traffic congestion is intense and widespread. The impact of some decisions on individual sectors will depend on the fine print, but the Council, which may meet less frequently in the upcoming poll season, has taken its eye off the promised overhaul of GST rates. No successor was named to steer the ministerial group on rate restructuring, previously helmed by erstwhile Karnataka Chief Minister, B.S. Bommai.

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