38th GST council meeting : the big decision that was taken on lotteries

 38 that GST council meeting

It's on money control. I'm Sachi butter and with me is going to Jordi is the Deputy executive editor of money control and we are here to discuss the updates from the 38 that GST council meeting that took place yesterday. Thanks, not quarter for joining in. Let me Begin by asking you the big decision that was taken on lotteries on hiking the rate on lattes yesterday. What are your thoughts on that and also about the process that was undertaken good voting process to hide these rates. So you will the the council decided not to go for a general change in rates. Yeah, and and and they were reasons for that will come to that later. But the the the big decision of the only decision that was probably taken amended to trim a minor. Once the major decision that was taken was to increase the rate of water. It was standard rate of 28 percent. Yeah until now and this is effective from March the new rates, but until now lotteries were being taxed at two different rates. GST was you know, there are two different rates of GST were imposed on lotteries one.

run by the state governments and those authorized by state government but run by private parties as well as interstate supply of lotteries those with Paxton 12 and 20 percent respectively. So the there was a proposal before the council that you need to standardize these rates and bring it to 28% They were what we know now gather is that are 21 states actually backed the proposal and they were seven states that did not you know, they were opposed to the proposal eventually the finance means that we try to be you know hammer out a consensus and try to ensure that so far what has been the practice of the GST council is that every decision has been taken to a consensus. Yeah, and she tried to maintain that practice even in this meeting, but as she herself came out and said that while practice is not part of the rule book, she tried her best and eventually say a sense the mood of the house and decided to put it to vote. So this is the first time that any decision has been has been good to vote the

The rules does allow the rules do allow that if there is no consensus and if there is there is a division among if this disagreement on a certain proposal then the majority decision will prevail in this and the similar process was adopted for this decision. And this is the first time this is the 38 million the first time in thirty eight meetings meetings that something has been put to vote through a majority this some decision has been taken to a majority voting but beyond that That the council did not take any major decisions importantly as I said before there has been no decision on in raising or changing rates on on a vast number of goods and items items and services that was expected. Right? So the minor decisions also will come to what were the other key decisions are of C or the rates on the woven bags. Yeah, and also the industrial parks there are some decisions even if you could expound upon that so yeah, so the two other rate changes that has happened one is on woven and nonwoven.

It's and that adds now that a minor rate changes happening likewise when the Sleep expert a is also certain procedural decision that Amanda tax evasion decisions that have been taken say for instance. There is in there is now a tax credit on certain types of inputs that were to be claim from 20% to 10% It has been brought down. So that is that that is the tax evasion measure again, and there is also a decision that has been taken on its again procedural weather where the counselors decided. Had to give one more month for filing returns of the audited returns of the first year of GST, which is 17 18, which is which is which is again a procedural decision, right? Absolutely now apart from this if you could just help us understand it anything with regards to the compensation to States also was discussed in yesterday's meeting. So that was that that has been one point of friction, which has been which has dominated GST discussions over the last two months and and States claimed that their the compensation. that is dude has not been

But over the last two my over the last month or so certain amount of compensation seem to have been released. So there was there was a degree of deliver something to have discussion there on that topic, but that seems to have you know Pastor for now because because money seems to have been released by the center stage, but the point here, is that while states are protected by a compensation in case of Revenue loss for a period of five years. It is the center's the state's say that the center is was the center is holding back the compensation that is due to them. Because there has been Revenue loss and as we know GST is a destination based tax. So if in on every occasion that consumption that if conduction comes down GST collections obviously will also come down and states will have to be protected under law the protective of five years for any Revenue loss based on a certain calculation that has been agreed that was agreed upon when GST was launched states have not have have been saying that that compensation that Revenue hasn't come to them and it is effectively a public financing CA the center has now said that they have started

listen and a significant amount proportion of the of the due compensation is already been passed on to States right and let me now come to the big decision. I will said was not to hike the rates or the slabs or tamper with this Labs that are existing in the GST. So if we could help us understand, why did not the government's do that and we'll it now not pressurized because the whole idea was being talked about most maximize revenues for the collections from GST, which is definitely under the Target right now. Yeah, so there are there are two so the so the council have to take a very balanced V 1 is 1 Public Finance point of view,. Which the council did. Yeah and said that you know the the from a from a purely Public Finance point of view there seems to be a case for raising rates because revenues are extremely low. Yeah, the government has to compensate first the states and it also has to make its budget targets which are which are far below the budget targets at this point in time. We know that GST collections have touched crossed one point.

the three lakh crore last month, but if it has to maintain if it has to retain the or meet the budget, I'll come close to the budget targets then the net remain in the next four months from December to March. It has to eat a run rate of 1.4 like road. That seems extremely extremely challenging. Yeah, so one way of doing that was to raise the rates and and that was a tempting thing to do for the council given that Revenue shortfall has been so steep but the other side from the other side of the fence if I rate changes executed in an ounce. Now it will only lead to inflation. Yeah, and that it will be inflationary. It will raise prices of goods and services immediately and that could further perpetuate the slow down so that would force people to spend even less. Yeah, so the council in its wisdom decided it's this is not the right time to raise rates because at no point can the deceleration or the slide be, you know, made steeper because people will be forced to people maybe people may be prompted to buy even less because of inflation.

Generally become because of high rates could actually end up only pushing up inflation. And that is the decision that the council took in his wisdom. Even if there's a revenue shortfall the other avenues will have to be found out but they thought that the council thought our members of the council thought that this is raising a trying to plug the revenue shortfall by raising GST rates is not a prudent move. Absolutely. Thanks a lot. Thank God for sharing all those insights over there that the GST Council has not gone in. for GST rate hike and that is the big decision that has really come out from the yesterday's meeting because as was largely being expected to just maximum or booster maximize our boost the revenues the GST council could hike rates at this point in time to just meet the targets that they had set for the GST collections, but that hasn't happened because all the states will collectively and concerned with consensus decided that this would not be a prudent move at this point in time. Thanks a lot for joining us in this edition of editors take and do stay logged onto moneycontrol.com