The panel chaired by Union finance minister Nirmala Sitharaman, which decides on tax rates and structure after 17 central and state taxes such as excise duty and VAT were subsumed into Goods and Services Tax (GST), will meet again on October 12 to thrash out the state compensation issue.
Here are the top developments from the GST Council meet:
* The Council was divided on political lines opposing the Centre’s proposal of states borrowing to meet the shortfall in receipts.
* On the issue of releasing compensation to the states, Sitharaman said: “This year whatever we have collected till now, Rs 20,000 crore will get disbursed tonight”.
* When the GST was introduced in July 2017, states were promised a 14 per cent incremental revenue over their last tax receipts in the first five years of GST rollout. This was to be done through a levy of a cess or surcharge on luxury and sin goods, but the collections on this count have fallen short with the slowdown in the economy since last fiscal.
* To make up for this, the Centre suggested that the states can borrow against future compensation receipts.
* The finance minister said that the GST Council agreed to extend the levy of compensation cess beyond five years.
* The surcharge on cars and other luxury goods and tobacco products varies from 12 per cent to 200 per cent on top of the highest GST rate of 28 per cent. It was due to expire in June 2022.
* The surcharge on luxury goods such as cars and tobacco products, which varies from 12 per cent to 200 per cent, is part of the national GST introduced in 2017.
* Sitharaman said that some states wanted that the Centre calculates the GST shortfall amount at Rs 1.10 lakh crore, instead of Rs 97,000 crore. This was agreed to by the Centre before the 42nd meeting of the Council.
* The Centre in August gave two options to the states to borrow either Rs 97,000 crore from a special window facilitated by the RBI or Rs 2.35 lakh crore from the market and has also proposed extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.
* The non-BJP ruled states are at loggerheads with the Centre over the issue of funding the shortfall.
* Explaining the repayment schedule of the Council, Sitharaman said interest on the borrowed amount would be the first charge on the cess, which gets collected beyond the five years.
* The next charge would be 50 per cent towards the principal amount, which gets borrowed that is Rs 1.10 lakh crore and then the remaining 50 per cent would be towards Covid affected compensation.
* Finance secretary Ajay Bhushan Pandey said that from January 1, taxpayers whose annual turnover is less than Rs 5 crore will not be required to file monthly returns (GSTR-3B and GSTR-1). They will only file quarterly returns, he added.
* The finance secretary stated that the council’s decision to make small taxpayers pay returns on a quarterly basis rather than monthly will be a major relief. Number of returns comes down from 24 monthly returns to just 8 from next year, he further mentioned.
* The finance secretary also said that the council has decided to exempt satellite launch services by ISRO and Antrix.
* The panel will meet again on October 12.
(With PTI inputs)