NEW DELHI :
Amid expectations of an increase in goods and services tax (GST) rates and slabs to meet the revenue shortfall, Finance Minister Nirmala Sitharaman will chair the 38th GST Council Meeting today. At a press conference last week, Sitharaman did not rule out a GST rate hike.
On top of the agenda of the meeting would be a review of GST and compensation cess rates on various items, rate calibrations for addressing the inverted duty structure, compliance measures other than those currently under implementation to augment revenue.
Ahead of the GST meet, the Sensex jumped 129 points to hit a lifetime high of 41,480.91 in the opening session. Traders are optimistic that the GST Council meeting will bring in some good news for the markets.
Chhattisgarh Commercial Taxes Minister, in the meantime, hinted that there may not be a rate hike on the council's agenda.
Another senior official of the union finance ministry, who spoke on condition anonymity, said the central government has informed states that this is not the opportune time to raise GST rates.
Vinod Nair, Head of Research at Geojit Financial Services, said investors are also keenly waiting for the upcoming GST Council meeting to get any cues on overcoming revenue shortfall.
"Concerns on fiscal path due to shortfall in GST collection may influence government to hike tax slabs which is likely to add inflationary pressure in the economy resulting in India 10 year yield inching to 6.8%," Nair said.
Market reports indicate that the GST Council could also increase GST rates on jewellery. As a result, gold prices have jumped up around ₹200 per 10 gram in just two days. Abhishek Bansal, Chairman, ABans Group of Companies, said the move will be negative for the bullion industry, as gold is already burdened with a 12.5% import duty and a 3% GST. "It will further increase the cost of jewellery. Gold demand will be dented further in case of a government increase of GST on bullion jewellery," he said.
Sitharaman had even sought suggestions from various states on review of items currently under exemption for shoring up GST revenues. Citing slowing down of the economy, some states like West Bengal are against any GST rate hike.
"This is indeed alarming. We should not in any way tinker with the rate structure or impose any new cess at a time when the industry and consumers are going through the most distressing times with 'stagflation' knocking at our door (stagnation accompanied by growing inflation)," West Bengal Finance Minister Amit Mitra said.
Mitra has suggested that instead of increasing the tax burden on consumers and industry, the GST Council should provide relief to the industry so that they are able to tide over the present crisis.
Ahead of the meeting, the Centre has released ₹35,298 crore as compensation to states and Union territories to make up for the loss of revenue due to GST rollout, a payment some states complained had been stalled for months.
The Central GST collection fell short of the Budget Estimate by nearly 40 per cent during the April-November period of 2019-20, according to government data. The Finance Ministry has set a ₹1.1 lakh crore monthly GST collection target for the remaining four months of 2019-20 financial year.