There may be a meeting of the GST Council to check tax evasion and discuss other issues related to growth of revenue. This meeting is likely to be held next month.
GST council meeting will be held soon
The Special Goods and Services Tax (GST) Council may meet after the monsoon session of Parliament. In this, important issues like discussing revenue shortfall compensation mechanism for states, streamlining GST rates and duty structure, cracking down on scamsters to increase revenue and hardening of fake input tax credits are likely to be discussed.
A senior official told the Financial Express that during the special meeting with the state finance ministers, several opposition-ruled states who are demanding continuation of the assured compensation system for the next five years, could be discussed.
Recently, Union Revenue Secretary Tarun Bajaj indicated that reliance on cess or borrowing to bridge the shortfall may not be the right way forward. However, it is up to the GST Council to ensure that states are compensated with more revenue. Experts believe that it will take 2-3 years to pay off Rs 1.1 lakh crore already borrowed in back-to-back loans in FY21 and around Rs 1.6 lakh crore to be borrowed in FY22. With this, the states will be able to compensate for the shortfall in the assured GST revenue. These loans are to be repaid through cess income. The cess on demerit goods is being used to compensate states for revenue shortfalls against a guaranteed annual increase of 14%. Any further expansion in the assured compensation mechanism could lead to new borrowings, creating additional liabilities that would require levying a cess for a longer period.
Earlier, the Council’s fitment panel had recommended continuation of the process of correcting the inverted rate structure affecting government revenue. A proposal to correct the vicissitudes in respect of GST rates on footwear, readymade garments, fabrics and their inputs such as man-made fibers and yarns will be considered.
Punjab Finance Minister Manpreet Singh Badal recently suggested harmonizing tax rates and exemptions to eliminate tax evasion. This will also help in simplifying the tax credit chain. Badal had also said that the GST Council should discuss the band of rates within which states can be allowed to fix their respective SGST rates after June 2022.
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