GST Council Meet: States' Upper Hand to Shape Crucial Reforms
The upcoming GST Council meeting on June 22 will be crucial, with states likely to have a significant say in policy decisions, including rate rationalisation, petroleum products, and real estate under GST.
Gst CouncilRate RationalisationPetroleum ProductsReal EstateCoalition GovernmentReal EstateJun 16, 2024
Rate rationalisation is the topmost item on the agenda, but it's unlikely to see any immediate change. The Group of Ministers (GoM) appointed to consider the rate restructuring is yet to finalise its recommendations. Moreover, given the recent assembly elections, the GoM itself may see a restructuring. Currently, essential and semi-essential goods constitute 70-80% of India's consumption, and attract a levy of 5-12%. The multiplicity of taxes has led to inverted tax duty classification issues leading to legal disputes; the Centre wants to reduce the current rates of 5%, 12%, 18%, and 28% into three slabs. Will this lead to a consolidation of the two slabs, namely 5% and 12% or 12% and 18%? If so, analysts warn against rate tweaking as it could increase the tax burden of lower-income groups.
The other critical aspect includes petrol and diesel that are excluded from GST, but are subject to VAT, central excise duty, and central sales tax. While the Centre imposes taxes on the base rate, states determine their individual rates. It comprises a significant chunk of their tax revenues. Given states' high debt burden, particularly Andhra Pradesh, which happens to be home to the NDA's key coalition partner TDP, it will be interesting to see how the Council navigates the issue. Perhaps it can begin with low-impact petroleum products such as natural gas before considering a full-fledged rollout. As the tax regime turns eight next month, reforms process shouldn't take a backseat.
In the backdrop of a reduced mandate for the BJP in the Lok Sabha, the Council meeting assumes significance. The meeting will test the coalition government's ability to pursue reforms, particularly in the face of states' upper hand. With the states having a significant say in policy decisions, the Council meeting will be a crucial one to watch.
Information
The Goods and Services Tax (GST) is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services in India. The GST Council, comprising the Centre and states, is responsible for making recommendations on GST rates, exemptions, and other key issues.
The Telugu Desam Party (TDP) is a regional political party based in Andhra Pradesh, India. The party is a key coalition partner of the NDA government at the Centre.
Frequently Asked Questions
What is the key agenda of the upcoming GST Council meeting?
The key agenda includes review of GST rates on online gaming, bringing petroleum products, electricity, and real estate under GST, and rate rationalisation.
Why is the GST Council meeting crucial?
The meeting is crucial as it comes in the backdrop of a reduced mandate for the BJP in the Lok Sabha and will test the coalition government's ability to pursue reforms.
What is the current structure of GST rates in India?
The current GST rates in India include 5%, 12%, 18%, and 28% slabs, with essential and semi-essential goods attracting a levy of 5-12%.
Why are states opposing the inclusion of petroleum products under GST?
States are opposing the inclusion of petroleum products under GST as they determine their individual rates and it comprises a significant chunk of their tax revenues.
What is the significance of the GST Council meeting in the current scenario?
The GST Council meeting assumes significance as it will test the coalition government's ability to pursue reforms, particularly in the face of states' upper hand.
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