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The Goods and Services Tax (GST) Council will meet in Lucknow on September 17, for its 45th round of meeting. This will be the first time in 16 months, after the outbreak of the Coronavirus pandemic, that representatives from the Centre and the states will meet in person. According to reports, bringing petroleum products such as petrol, aviation fuel and diesel under the Goods and Services Tax (GST) regime, could be on the agenda in the 45th GST Council meeting which will be chaired by the Union finance minister Nirmala Sitharaman.
The agenda
Among the other items on the agenda will be the extension of compensation cess beyond five years, as demanded by some of the states, in the context of the economic ravages caused by the Covid-19 pandemic. Though the Centre may be reluctant to allow an extension of the promised deadline of June 2022, some states are reportedly demanding it in light of the economic shocks received by the restrictions caused due to the pandemic. Ironing out some other tax related issues such as ‘Inverted Duty Structure’ and the tax outgo on raw materials exceeding that on finished products may also figure in the agenda.
The GST Council meeting could also see some rift between states ruled by BJP versus those ruled by the opposition parties. According to a report published in the Mint, the difference between the two groups had become quite distinct over the issues of GST compensation, Centre’s reliance on various types of cess for revenue collection, proposal to bring petroleum products under the ambit of GST, the extent of tax relief on Covid-related medical supplies and the rules issued by a panel of bureaucrats in the periods between two meetings of the Council among others.
Several business dailies reported that a few states could raise their voice for the GST compensation mechanism, given how all through the pandemic they have had to shoulder the burden of launching several public welfare schemes.
The GST Council is also likely to take up the proposal of the Fitment Committee to bring the online food delivery services under its ambit.
GST compensation
According to the report, the constitutional guarantee for GST compensation up till the next financial year is based on a formula that calculates the state revenue to be protected by the Centre. ‘The protected revenue goes up 14% a year over the base year of 2015-16. The gap between revenue collected by the state and the protected revenue is given as compensation.’ However, the Centre feels that a 14% annual increase in protected revenue may not be viable, the formula is likely to be revised for the period beyond 2022.
The Centre could use this meeting as an opportunity to bridge the divide between the two groups, the report added.