GST council seems to be losing unanimity, says TS Singh Deo

The GST council meeting has ended with no decision on extending the compensation window to states. BJP-ruled states joined others in demanding an extension to protect state revenues. The five-year compensation window expires tomorrow.

However, the states said it is a question of recovering from the pandemic, while some said states must also stand on their own and how long can the Centre prop them up.

Speaking to CNBC-TV18, TS Singh Deo, Member of GST Council, said, “A few states said that we should all learn to stand on our feet — how sad that is. Those who are better off and those who are less in doubt — those who have better revenues, just because they are consuming states and not producing states (are not worried). Are we trying to say that we will not take into consideration the views of the losses being suffered by the manufacturing and producing states just because there have a larger population?”

He added, “The GST Council seems to be losing its unanimity. How can any state function unless it is guaranteed a reasonable growing revenue source? How is that state going to meet up its demands for capital expenditure for social sector investment, for a provision of jobs, etc? How is any state government going to do that? You said learn to stand on your own feet when you take away our revenue, which we were getting as mining states; as states with the heavy industries. You've taken our share and now you are saying learn to stand on your feet.”

GST Council defers state compensation decision till next meeting in August

MS Mani, Partner at Deloitte India said, “If all the discussions on compensation cess do seem to be happening between the Centre and states the way it is supposed to, it would be good to get some industry stakeholders also some industry bodies because eventually, the cess is being collected from a clutch of businesses, largely automobile and several others.”

The council has deferred the proposal to levy 28 percent tax on casinos and online gaming. A panel of ministers was given 15 more days to iron out issues over the valuation mechanism.

Bipin Sapra, Tax Partner at EY India, said, “My view was that somehow the online gaming industry hasn't even got its voice out there. In the current scenario, it pays 18 percent on the gross gaming revenue, which is basically the rake fee. Online gaming is a really growing industry. The moment you make it to 28 percent on the gross value, the growth, which we are going to see is going to go away. So I think this reconsideration is a welcome step.”

GST Council has also decided to remove the tax exemption on milk products, food grains, some vegetables. Also, it has hiked tax rates on LED lights, solar water heaters, some leather goods and textile works.

Prashanth Agarwal, Partner at PwC India, said, “Textile was deferred actually speaking last time. So, this time around they have again gone ahead and done the necessary change in the rate. So, hopefully most of these will only result in ensuring that the working capital issues the industry faces as far as the blocking of the credit and the refunds are concerned, they are taken care of. But of course, for each goods, it has to be looked at separately.”

Also Read: GST Council changes tax rates — these items will be more expensive