The Council’s decisions will have to strike a balance between boosting revenue receipts and not affecting consumption at a time the economy is suffering from a demand slowdown. (Mint)
The Council’s decisions will have to strike a balance between boosting revenue receipts and not affecting consumption at a time the economy is suffering from a demand slowdown. (Mint)

GST council eyes cess to boost revenue collection

  • The Council will meet next week to explore measures to raise revenue receipts amid an economic slowdown
  • The business newspaper Monday quoted Bihar Deputy Chief minister Sushil Kumar Modi that the cess route is the only feasible option

NEW DELHI : Central and state governments are considering expanding the scope of the cess presently levied on items in the highest Goods and Services Tax (GST) slab of 28% to boost revenue collections. The Council will meet next week to explore measures to raise revenue receipts amid an economic slowdown.

The Financial Express reported on Monday quoting Bihar Deputy Chief minister Sushil Kumar Modi that the cess route is the only feasible option to ensure that the states continue to enjoy the protected state GST (SGST) revenue growth of 14% annually. The central government is bound to compensate states for any shortfall from their projected revenue growth. The Council’s decisions will have to strike a balance between boosting revenue receipts and not affecting consumption at a time the economy is suffering from a demand slowdown.

Since the GST cess is levied on items in the highest slab, which are regarded as luxury or sin goods, it would be politically easier to increase it. Mint reported on 3 December that the Council called the meeting to discuss various revenue raising measures including changes to GST rates and the cess levied on select goods.

The proposed meeting on 18 December would be the first ever meeting of the Council in which tax rate increases will be considered seriously. At its last meeting in September in Goa, there was a token increase in the tax rate on one product, signalling that the era of GST rate reductions was over. The move to review tax rates, exemptions and the scope of cess comes at a time opposition ruled state governments are accusing the BJP-led Central government of delays in giving them their GST compensation.

Central and state officials are also expected to explore ways of checking tax evasion at its next meeting. The Council has recently taken steps to check tax evasion including by limiting the input tax credit available to businesses if their suppliers have not uploaded the invoice and remitted the taxes collected from them.

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