GST Council discusses steps to improve revenue mop-up
New Delhi : The Goods and Services Tax (GST) Council on Friday set up a seven-member ministerial panel to examine the legality of imposing a new tax on certain goods and services to raise resources for natural calamity-hit states like Kerala.
The panel, headed by Union Finance Minister Arun Jaitley and comprising of representatives of all states and UT, also took stock of the shortfall in tax mop up by majority of the states under the new indirect tax regime.
Briefing reporters after the 30th GST Council meeting, Jaitley said the demand of Kerala to allow imposition of higher taxes on goods and services within the state to help tide over the losses suffered due to flood was considered by the Council and it was decided that the matter should be referred to a seven-member Group of Ministers (GoM), which would include representatives from North-eastern, hilly and coastal states.
The committee will look into five issues flagged by the Council, including whether the new tax should be levied only in the state concerned or should it be an all-India levy, and that should it be on specified luxury or sin goods only.
The GoM will also look into whether National Disaster Response Fund (NDRF)/State Disaster Response Fund (SRF) mechanism is sufficient to deal with calamities and also define circumstances where the ‘calamity tax’ can be imposed as also the legal aspect of imposition of such a tax within the GST.
“We will have a seven-member group of ministers which in the next few weeks will make a recommendation,” he said, adding that the grouping will include representatives from North-east, hilly states and coastal states as they are hit by calamities most.
While Jaitley said the GST law states that a special rate of tax can be imposed after permission of GST Council, Kerala Finance Minister Thomas Isaac said the law provides that the Council can impose a tax for a temporary period in the GST framework to help states in terms of exigencies. “We have not thought out the details, therefore GoM will look into it. An additional 1 per cent tax on some commodities was discussed,” Isaac said.
On revenue position of the states, Jaitley said the states faced an average 16 per cent shortfall in Goods and Services Tax (GST) mop up in the first year of implementation (July 2017-March 2018). The shortfall has come down to 13 per cent during April-August period of current fiscal.
While only 6 states — Mizoram, Arunachal, Manipur, Nagaland, Sikkim and Andhra Pradesh — are facing revenue surplus in current fiscal, 25 states are staring at revenue shortfall and have to be compensated by the Centre. The state deficit has to be neutralised within five years of launch of the GST.
“As it goes on a glide path downwards, the more it comes closer to zero at the expiry of the 5th year the more the states will be closer to achieving those targets,” Jaitley said. In 2017-18, the Centre had released Rs 41,147 crore to the states as GST compensation to ensure that the revenue of the states is protected at the level of 14 per cent over the base year tax collection in 2015-16. In current fiscal, there has been a spike in the bi-monthly GST compensation paid to the states by the Centre during June-July.
The Centre paid Rs 14,930 crore to compensate states for revenue loss incurred in June and July, a nearly four-fold jump compared to Rs 3,899 crore paid for April and May. Asked whether the government would be able to meet about Rs 13 lakh crore budgeted GST revenue target, Jaitey said: “Currently, we are in the middle of the year… there is festival season coming… We will try and come as close to the target”.
He said on the direct taxes side the government is ahead of the target. “Taking it together with the GST collection, I am confident of meeting the fiscal deficit target”.
Further cut in tax rates unlikely
NEW DELHI: Further reduction in goods and services tax rates is unlikely, with Finance Minister Arun Jaitley on Friday saying that the government must maintain a revenue-neutral rate.
The finance minister said the government was moving towards the GST revenue collection target for 2018-19. “Currently, we are in the middle of the year… there is festival season coming…We will try and come as close to the target,” Jaitley said. So far in 2018-19, GST collections have averaged Rs 96,706 crore a month, 7.6 per cent higher than the monthly average of Rs 89,885 crore in 2017-18, but lower than the target.
As per the Budget for 2018-19, the central government’s target for GST collections for the full year is Rs 7.44 lakh crore.
GST collections in August declined month-on-month to Rs 93,960 crore, as consumers deferred purchases waiting for the reduction in rates on some items to become effective from Jul 27.
In late July, the GST Council had reduced rates on some consumer durable goods such as televisions, washing machines, and refrigerators to 18 per cent from the highest tax bracket of 28 per cent.
Petrol, diesel prices not discussed
New Delhi: Finance Minister Arun Jaitley on Friday parried questions on whether the government was considering a cut in taxes on imported crude to bring down the prices of petrol and diesel. “It was not in the agenda,” he said. Earlier, when asked whether the GST council meeting discussed bringing petrol and diesel under the ambit of GST, Jaitley said “It was not in the agenda”.