New Delhi The Union government’s Goods and Services Tax (GST) Council is likely to tell states in the next meeting that the spurt in GST revenue shows that states now need funds from the Center as compensation for the 2017 indirect tax reform. is not needed.
The next meeting of the GST Council is expected to be held this month.
The Center is expected to tell the states that the 20% increase in GST revenue collection in April was higher than the 14% protected revenue growth rate of the states supported by GST compensation from the Centre.
In addition, large state economies such as Maharashtra, Uttar Pradesh, Rajasthan, Haryana and Gujarat have posted strong revenue collections in the recent past.
A person familiar with discussions between the central and state governments said some states need to complete their state budget related formalities and once that is done, the next GST Council meeting will be called.
State governments continue to demand GST compensation even after June 2022. However, they are aware that the proceeds of the GST cess collection will have to be used to pay off the debt raised in the last two financial years to meet the shortfall in compensation and this is unlikely. The central government will extend the compensation payment beyond June, said a state government official, who also spoke on condition of anonymity.
According to official data, private final consumption expenditure at current prices reached pre-pandemic levels in FY22, growing at over 16% annually.
Policymakers are also working on proposals for casino and race courses as well as online gaming.
A Group of Ministers led by Meghalaya Chief Minister Conrad Sangma is examining the feasibility of levying 28% GST rate on these sectors.
These firms are paying 18% GST based on the court order for lack of clarity on the subject. Businessmen claim that these are games of skill rather than chance.
Policymakers are also working on a clarification that is required on the applicability of a federal indirect tax on certain types of cryptocurrency transactions that are neither goods nor services in the nature.
However, there is no proposal to increase the GST rate on services of cryptocurrency exchanges from 18% to 28% now, said two government officials, who also spoke on condition of anonymity.
Industry players are concerned about the increase in the GST rate on cryptocurrency services, as the Center has introduced 30% income tax on income from transfer of virtual digital assets, including cryptocurrencies, with no set-off for loss and Also there is no deduction for other costs. acquisition costs.
Cryptocurrency trading is also subject to a 1% tax deduction at source.
According to Muraleedharan R, partner, Deloitte India, items that fall in the 28% GST category are considered non-essential in nature, giving executives an opportunity to raise more revenue.
Another ministerial group is examining proposals for rationalization of the GST rate, but it remains to be seen whether the GST Council will consider these in the near future in view of rising inflation.
Emails sent to the Finance Ministry and the GST Council Secretariat on Monday seeking comments for the story remained unanswered at the time of publication.