Goods and Services Tax (GST) Council, the federal indirect tax body, broke from its tradition of consensus-based decision-making to vote on a proposal for imposing a uniform tax rate on lotteries.
The decision to go for voting was taken after efforts by Union finance minister Nirmala Sitharaman to build consensus on the proposal failed as states were divided on the issue and one state insisted on voting. Two state representatives, who were present at the Council meeting, said on condition of anonymity that Kerala had insisted on voting.
The Council decided to set the GST rate on all lotteries at 28%. At present, lotteries run by state governments are taxed at 12%, while those authorized by states and operated by private players as well as interstate suppliers of lotteries are taxed at 28%. The decision was favoured by 21 states and opposed by seven, while three abstained. The change is effective from 1 March.
Addressing a media briefing after the GST Council meeting, Sitharaman said she was reminded that tradition is not part of the rulebook. “Every attempt was made to keep the set tradition live… Eventually, it was reminded to me that tradition was not part of the rulebook and that rules are what should govern the running of the house… It (the voting) was not imposed by the Council or by me as the chair but it was on the request from one member," she told reporters.
The Council also took a few steps to curb tax evasion, but did not take up any proposal for GST rate increase.
The decision to abstain from raising GST rates comes after official data issued last week showed consumer goods output had shrunk 18% in October, its fifth straight month of contraction. Several state ministers also said the time was not right for raising GST rates.
The anti-evasion measures included limiting input tax credit in cases where invoices or debit notes are not properly reflected in records, blocking fraudulently availed tax credits and invalidating e-way bills generated by taxpayers who have not filed their tax return forms for two tax periods.
“The focus on revenue augmentation measures could lead to several anti-evasion measures in the coming months as the decision to block input tax credit in cases of fake invoicing indicates," said M.S. Mani, partner at Deloitte India.
The Council also decided to exempt entities in which either the central or state government owns 20% or more from paying an upfront amount for long-term lease of industrial or financial infrastructure plots. Currently, this relief is available to entities with at least 50% state ownership. Also, businesses will get an extra month for filing annual returns and tax audit report for the first year of GST, 2017-18. The new due date is 31 January.