NEW DELHI: The GST Council on Tuesday accepted the interim report of the group of ministers (GoM) on rate rationalisation headed by Karnataka Chief Minister Basavaraj S Bommai. The panel also cleared extension to the GoM, State sources told The New Indian Express.
The decision comes at a time when issues regarding revenue leakage due to the subjective nature of the term ‘branded’, were raised. As per the panel’s recommendation, the pre-packed and labelled and other items like curd, lassi, and puffed rice should attract nominal GST.
“The GoM’s opinion was that the exclusion condition for such exemptions should be simplified by replacing the term ‘branded’ with the deterministic condition of being ‘pre-packaged and labelled”, the source added.
The report also suggests hotel accommodation having room rent up to Rs 1,000 a night should attract a 12% GST rate. The panel also recommended that on edible oil, the inverted rate should be disallowed. Earlier, states had highlighted the concerns over the significant fall in revenues from as against the pre-GST regime with the narrowing down of scope of coverage in GST, a Government source said.
It is to be noted that the committee had recommended a revenue-neutral GST rate of 15.3 per cent when the new tax regime was introduced. Currently, the GST rate is only about 11.8%. The GST Council on Wednesday will discuss the issue of extending the compensation scheme to States beyond June 30.
It may be recalled that at the time of the introduction of the GST framework in 2017, the Government had committed to protect 14% revenue buoyancy for States for five years. The Centre had borrowed Rs 1.10 trillion in FY21 and Rs 1.59 trillion in FY 22 to compensate for the shortfall in GST compensation cess revenue. During the pandemic due to a sharp decline in GST revenue, part of the compensation had been given to States via loans. The government had recently notified about the extension of the levy of compensation cess till March 2026 in order to enable States to clear their dues.