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August 26, 2020

Expectations from the upcoming 41st and 42nd GST Council Meetings

by Rubina Dsouza in GST

Expectations from the upcoming 41st  and 42nd  GST Council Meetings

Introduction

The global pandemic has been a nightmare and has worsened the economy worldwide.  The GST revenue collection by the Government has been no exception, as the pandemic has resulted in a major decline in the revenue collections thereby, leading in shortfalls to compensate the states.

The upcoming GST council 41ST and 42nd  meetings will be held on 27th of August 2020 and 19th of September 2020 respectively.

Expectations from the GST Council Meetings

1.The 41st GST council meeting which will be held on 27th August 2020, will broadly be  a discussion about the incapacity of the Central Government to compensate the State this time due to decline in the GST revenue collection.

2. Whereas the 42nd GST council meeting which will be held on 19th of September will throw light on the following 3 aspects broadly;

a. Administration of tax evasion cases in an effective manner

b.From the revenue collection prospective the tax rates of luxury goods like automobiles and sin goods like tobacco, pan masala etc may rise.

c. Implementing GST Tribunals and its creation shall also be a matter of discussion.

Solutions to these Upcoming Issues in the 41st  and 42nd  GST Council Meetings

Solutions for 41st GST Council Meeting:

Since the main objective of this meeting is about the matter of compensation to the state for revenue provided by the Central Government which will not be possible and which the Centre has already cleared due to deficit in revenue collection. In this situation expectation are made from the Finance Minister Mrs. Nirmala Sitharaman to perform the following solutions:

  1. To resolve the difference that is arising between the Centre and State over the cess liability.
  2. It seems that there is a possibility to analysis and evaluate an approach towards market borrowings in order to compensate the deficit is a solution put forth by the Centre. Since the Centre can allow states to borrow on the strength of future receipts from compensation funds, But the decision of the Central Government shall be considered as final in the matter
  3. Or by simply adding more items under the compensation cess
  4. The debate by the state is that the Centre is responsible to pay compensation on time and that the compensation funds will not have sufficient  funds to cover the borrowings.
  5. The State thereby considers it favorable for raising tax rates for revenues and for expansion of the amount of compensation cess.

Solutions for 42nd  GST Council Meeting:

It is likely that the discussion in the 42nd  council meeting will be on raising of tax rates on luxury and sin goods, powerful and effective administration and insertion of GST Tribunals

  1. The council may consider the rise of tax rates on sin goods like pan masalas attracting 100% cess and having an upper celling of 130% in order to support cess collection.
  2. Similarly, the Aerated drinks and  tobacco which  are now at 12% have upper limit of 15% as celling and that of tobacco which is limited to Rs. 4170 per 1000 sticks or 290% where the amount of tax is proportionate to the estimated value of goods or transactions concerned. This in turns gives enough opportunity to  insert additional cess and thereby increase GST revenue for sin or luxury goods.
  3. The GST council will also draw attention to take serious measure for tax evasions and thereby create and effective admirative system.
  4. The discussion will further also throw light on the insertion and establishment of GST tribunal. This is a much needed approach expected to be taken by the GST council in order to resolve matters efficiently and promptly.

Thereby we can look forward to some important changes like hike on sin goods, establishments of GST tribunals and implementation of effective measure for tax  evasion by the GST Department in the upcoming council meetings.

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