NEW DELHI : Federal indirect tax body, the Goods and Services Tax (GST) Council, is set to explore ways of optimising GST revenue collections at its meeting on Wednesday as a sharp economic downturn has hit finances of union and state governments.

Union finance minister Nirmala Sitharaman and state ministers represented in the Council will seek ways of plugging revenue leakage, improving the efficiency of the GST system using technology and examine specific steps to augment revenue as advised by a panel of officials led by revenue secretary Ajay Bhushan Pandey.

On Monday, Pandey urged senior officials of both the direct and indirect tax administrations to achieve revenue targets while making sure that no tax payer is troubled. The central government has set a GST revenue target of 4.5 trillion for the next four months.

The Council is expected to be cautious while examining the possibility of changes in tax rates, slabs, or cess as data released last week showed that consumer goods output contracted 18% in October, the fifth straight month of contraction. Industrial output data showed that the contraction in consumer goods production was deeper than the nearly 10% de-growth seen in September.

At a press briefing last week, Sitharaman had declined to comment on the possibility of GST rate change, saying there was a buzz about it everywhere but her office. She, however, did not rule out the possibility of a change in tax rates either.

Experts have said since GST is levied on consumption, it is natural for tax collections to dip when the economy is going through a slowdown due to declining consumption.

The central government has diffused the tension in centre-state relations by releasing GST compensation of over 35,000 crores to states earlier this week. Although states get compensation for any shortfall in their GST receipts benchmarked against an agreed 14% annual growth, the central government’s overall revenue shortfall adversely affects states too. States are currently entitled to 42% of the central government’s overall direct and indirect tax receipts. States take into account the union government’s tax revenue projections while planning their spending for the year.

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