GST Council Meet: Will Coalition Dynamics Affect Decision-Making?
The upcoming GST Council meeting is expected to address several key issues, including rate rationalisation, bringing petroleum products and real estate under GST, and reviewing GST rates on online gaming.
Gst CouncilRate RationalisationPetroleum ProductsReal EstateOnline GamingReal Estate NewsJun 16, 2024
Conventionally, the Centre has one-third of votes in the Council, while states have an upper hand, collectively holding two-thirds. This means states will have their say on policy decisions in any case. However, some believe the Council may hit a deadlock on key issues as states sense a weaker Centre and the coalition government may mar its hand in pursuing reforms like before.
Rate rationalisation is a top priority, but it is 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.
Another critical aspect is the exclusion of petrol and diesel from GST, which 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. The Centre and states need to work together to address the complexities of GST and ensure its smooth implementation. The outcome of the GST Council meeting will be closely watched, as it will have a significant impact on the economy and the common man.
Frequently Asked Questions
What is the main agenda of the upcoming GST Council meeting?
The main agenda of the GST Council meeting is to address several key issues, including rate rationalisation, bringing petroleum products and real estate under GST, and reviewing GST rates on online gaming.
How are states expected to influence the GST Council meeting?
States are expected to have a significant say on policy decisions, given that they collectively hold two-thirds of the votes in the Council.
What is the current status of rate rationalisation?
Rate rationalisation is a top priority, but it is unlikely to see any immediate change, as the Group of Ministers (GoM) appointed to consider the rate restructuring is yet to finalise its recommendations.
Why are states hesitant to include petrol and diesel under GST?
States are hesitant to include petrol and diesel under GST because they comprise a significant chunk of their tax revenues.
What is the significance of the GST Council meeting?
The GST Council meeting is significant because it will have a significant impact on the economy and the common man, and will determine the direction of GST reforms in the country.
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