45th GST Council meeting to be held on 17th September 2021

The GST Council will assemble for the 45th meeting on Friday, 17th September 2021 at Lucknow, Uttar Pradesh. The Finance Ministry took to social media to make this announcement on 1st September 2021.

The 45th GST Council meeting will be held offline for the first time after a year and a half of virtual meetings, focused chiefly on countermeasures to tackle the pandemic. The last meeting was the 44th GST Council meeting held on 12th June 2021 to reduce or exempt tax levy on COVID-19 essentials. 

The upcoming council meeting will have an assortment of matters for discussion. It may range from rate rationalisation versus revenue augmentation to burning GST compliance issues, especially for small taxpayers.

With a possible outbreak of the third wave, expectations are high that the government will extend the tax concessions on COVID-19 essentials further. The government slashed the GST rates on COVID treating drugs such as the Tocilizumab, the Remdesivir, the medical oxygen, the oxygen concentrators, and other essentials. Currently, the tax on these items is levied at low rates until 30th September 2021.

The next possible issue on the table is GST compensation to states. With the current economic situation, the Council may recommend extending the compensation to states beyond June 2022. Opposition-ruled states are already in favour of the extension by five years. In contrast, the government considers that any further borrowing or cess collections to make up for the revenue shortfall may not yield the result. 

The Union Revenue Secretary Tarun Bajaj opines that any such extension of compensating the states could force the Central Government to borrow more. Additionally, it will also necessitate the Council to extend the levy of compensation cess on sin goods.

Further, the council will discuss revenue augmentation measures as well. The Council believes that the current GST rates are set much lower than the cumulative average of taxes charged in the erstwhile VAT regime, leading to revenue collections below par.

Accordingly, there might be initial discussions happening on streamlining the GST rate structure. GST collection trends of the past few months will also be deliberated. Further, a final call is expected to be made on the inverted tax structure for several vital sectors facing the issue. 

The possible picks at the upcoming 45th GST Council meeting may include fabric, textile and footwear. However, a government official has indicated that the GST Council will not decide to reduce GST rates for the auto sector anytime soon.

Several state finance ministers have recommended particular ways of levying GST rates for better collections. Punjab Finance Minister Manpreet Badal has suggested that the council fix the states’ cap and floor GST rates. It helps them decide a range within which the states must be allowed to levy State GST (SGST) after June 2022. 

On the other hand, Odisha Finance Minister Niranjan Pujari recommended imposing GST on pan masala and gutkha to curb tax evasion. He stated that tax could be levied based on production capacity instead of the actual output or sales.

Tax evasion continues to be a menace for the government, with a steep rise in cases of fake ITC claims recently busted across India. Hence, the GST Council may make announcements to tighten its anti-evasion measures.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in