New Delhi:
In a slew of decisions at its 49th meeting on Saturday, the Goods and Services Tax (GST) Council approved the release of over ₹33,500 crore worth of compensation cess to the states, and agreed to table a draft legislation in the current session of Parliament to establish an appellate tribunal.
The Council provided relief to businessmen by allowing a one-time amnesty for past lapses and rationalised late fee on annual returns, besides accepting recommendations of a group of ministers to plug leakage of revenues on commodities such as pan masala, gutkha and chewing tobacco.
It reduced tax on liquid jaggery (rab) to zero from 18% if sold loose, or 5% if labelled and sold in packages, finance minister Nirmala Sitharaman said. The council also reduced tax on pencil sharpeners from 18% to 12%. It removed tax on tracking devices or data loggers affixed on durable containers, which was earlier taxed at 18%, she said.
The council extended exemptions on coal rejects if supplied to and by a coal washery, and to services provided by the National Testing Agency to conduct entrance examinations to educational institutions.
“It is also decided to tax services supplied by courts and tribunals under the reverse charge mechanism,” Sitharaman said. Reverse charge mechanism places the liability to pay tax on the recipient of supply of goods or services instead of the supplier.
The day-long meeting took place in an “entirely cordial” atmosphere, which accepted reports of two ministerial panels, one with “slight modification in the language” on the GST appellate tribunal that was headed by Haryana deputy chief minister Dushyant Singh Chautala, Sitharaman said.
Members of the council have agreed to set up the GST appellate tribunal, said Sitharaman, who is also the chairperson of the council. The central government will circulate the first draft of the amendments on Sunday to the states for their comments in next 5-6 days, she added.
A draft will then be readied to again be circulated among the members and then taken up in Parliament along with the Finance Bill, she added.
The 49th meeting of the GST Council would consider setting up the tribunal, HT had reported on February 8.
“The chairperson of the GST Council has been authorised to pool it (comments of states) all together and finalise it because there is not enough time for us to meet again before the Finance Bill,” Sitharaman said.
The GST Council is the apex decision-making body on indirect taxes, chaired by the Union finance minister and represented by states through their respective finance ministers. Barring one instance, its decisions have been unanimous since its inception in July 1, 2017.
The law bringing GST into effect has provisions to set up an appellate tribunal for disputes between assessees and the authorities – in its absence, the disputes end up in the high courts.
Briefing about the council meeting, Sitharaman said while the entire compensation dues to states up to May 31, 2023 were already cleared, ₹16,982 crore pending for June is also being cleared by the Centre immediately, and it will be later “recouped” from the Compensation Fund meant for this purpose.
“In other words, the entire pending balance of the GST compensation, which is total of ₹16,982 crore for June will be cleared… Although this amount is not available in the Compensation Fund as of today, we have decided to release the amount from our own resources and the same amount will be recouped from the future compensation cess collection,” she said. Thus, the entire compensation amount for five years since July 2017, as envisaged in the GST Act, has been cleared, she added. The centre also cleared “admissible” final GST compensation of ₹16,524 crore pending to six states after they furnished the Accountant General’s (AG) certificates for the same, she added.
At the time of launching the GST regime, the law assured states a 14% increase in their annual revenue for five years of the transition period from July 1, 2017 to June 30, 2022, and guaranteed that their revenue shortfall, if any, would be made good through a compensation cess levied on luxury goods and sin products such as liquor, cigarettes, other tobacco products, aerated water, automobiles, and coal.
While states have no claim on compensation from July 1, 2022, the cess continues till March 31, 2026, to service the back-to-back loans availed by states when compensation cess collection fell in 2020 and 2021 because of a slump in economic activities due to the Covid-19 pandemic.
“It is good to see more clarity emerging on the GST tribunal, as this has been a long-awaited measure for businesses to avoid approaching the high courts for GST matters,” said MS Mani, partner at Deloitte India, a consultancy.
Experts praised the consensus-based approach of the federal body and the magnanimity of the Centre. “The decision of the central government to release the GST compensation for June 2022 to the state governments through their own funds would go a long way in establishing the trust of the states in the GST regime,” said Saurabh Agarwal, tax partner at consulting firm EY.
“The GST council meeting provides the institutional framework for states and the Centre to discuss and arrive at a consensus on rate changes, policy matters, tax collections, new requirements, etc., and this meeting has continued to carry that ahead,” Mani said.