Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary, Revenue Secretary Sanjay Malhotra and others during the 52nd Goods and Services Tax (GST) Council Meeting, in New Delhi, on October 7, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has decided to raise the maximum age limit for the president and members of the GST Appellate Tribunals, Finance and Corporate Affairs Minister Nirmala Sitharaman announced after the 52nd Council meeting.

The president can have a tenure up to the age of 70, raised from 67 earlier, while the cap for members has been raised from 65 to 67. The minimum age of appointment, which was not specified earlier, is now recommended to be 50 years.

“We wanted it to be clear that advocates with up to ten years of experience must be minimum for consideration to become judicial members of the tribunals,” said Ms. Sitharaman.

The GST Council also decided that food preparations of millet flour in powder form, with at least 70% of the composition as millets in the blend, will have a 0% GST if sold loose or packed without any branding and labelling, and 5% only if sold pre-packaged and in a labelled form.

Taxing extra-neutral alcohol

Another critical decision taken that Ms. Sitharaman said would have major implications in Centre-State ties was that though the GST Council had, by law, the right to tax the extra-neutral alcohol (ENA), the Council has ceded that right to tax ENA to the States.

“It’s States’ decision now to tax it or not to,” she said. “This has been done in the interest of the States.”

The Allahabad High Court had earlier ruled that States had lost their competence to levy a tax on ENA.

The GST on molasses has been reduced from 28% to 5%, which the Minister said would benefit sugarcane farmers and will enable them to get paid faster from the sugar mills.

“We also believe that it will reduce the cost of cattle feed. The GST rate notification will be amended to create a new entry for extra-neutral alcohol for industrial use and that shall attract 18% tax,” she said.

On services, in order to promote tourism, the Council has given a conditional exemption to foreign-flag, foreign-going vessels, from the levy of Integrated GST, if they convert temporarily for a coastal run.

“In other words, for the next couple of months, in the winter, let’s say foreign run vessels do cruise tourism along India’s coast, we have decided to exempt them from 5% IGST normally levied. This will promote tourism particularly on the Western coast, from Mumbai to Kochi, and even the eastern coast,” said Ms. Sitharaman.

Image used for representational purposes only.
| Photo Credit: Special Arrangement

India’s gross revenues from the Goods and Services Tax (GST) hit a three-month high to cross ₹1.65 lakh crore in July. However, at 10.8%, it was the slowest uptick in collections since July 2021 compared to revenues from the same month last year.

Revenues from domestic transactions and services imports grew 15% in July, which marked the fifth occasion that GST revenues have crossed the ₹1.6-lakh-crore mark during a month. Sequentially, July’s collections, for transactions undertaken in June, were 2.2% higher than the previous month’s GST kitty.

The Finance Ministry did not disclose the trend for GST collections on import of goods, but back-of-the-envelope calculations indicate that there was a 0.8% decline in July from a year ago. Integrated GST collections on goods imports dropped by 0.43% to ₹41,239 crore, while GST Compensation Cess levies on goods imports dropped 15.6% to ₹840 crore.

Overall GST Compensation Cess levies, which will continue till at least March 2026 to repay market borrowings made amid the pandemic to compensate States, grew 7.9% in July to touch nearly ₹11,780 crore.

Central GST or CGST collections in July stood at ₹29,773 crore, while State GST (SGST) yielded ₹37,623 crore. The total IGST collection came to ₹85,930 crore, with around 52% of that revenue coming from domestic transactions.

The Hindu Editorial | Reset time: On GST revenue growth

“The government has settled ₹39,785 crore to CGST and ₹33,188 crore to SGST from IGST. The total revenue of the Centre and the States in the month of July 2023 after regular settlement is ₹69,558 crore for CGST and ₹70,811 crore for the SGST,” the Finance Ministry said.

While overall domestic revenues grew 15%, as many as 18 States recorded 15% or higher growth, while 11 States grew at a slower pace. 

Strife-torn Manipur was the only State to record a contraction, with a 7% drop in revenues. However, the north-eastern States of Mizoram (47%), Meghalaya (27%), Sikkim (26%), recorded the highest growth in revenues, followed by Delhi (25%), Uttar Pradesh (24%) and Tripura (23%).

At the other end of the spectrum, Nagaland, with a 3% rise in revenues, Chhattisgarh with 4%, and Andhra Pradesh (5%) saw the weakest growth, followed by Gujarat and Telangana, both of which clocked a 7% growth.

The Hindu Editorial | An incomplete reform: on six years of the Goods and Services Tax  

“The past trend of six key States generating almost 60% of the nationwide GST collections continues in the current month as well,” noted MS Mani, partner at Deloitte India, adding that compliance drives from the Revenue department were yielding results with steady revenue trends.

The ₹1.6-lakh-crore monthly collection mark may be the new norm for GST revenues, said Abhishek Jain, partner and national head for indirect tax at KPMG, who said revenues might rise further with the upcoming festival season and the approaching “normal period of limitation” for 2017-18 assessments.

Mandatory e-invoicing for all firms with a turnover of ₹5 crore, which kicks in this month, is also expected to bolster revenues, though it may pose some transition challenges for smaller businesses.

“Smaller taxpayers may have trouble embracing the new compliance paradigm, but it would ultimately expedite operations, improve transparency, and encourage more transactions with larger businesses, despite the transition’s potential difficulties,” said Saloni Roy, partner at Deloitte India. 

The 15th Finance Commission has recommended that States be given 41% of the divisible tax pool of the Centre. File.
| Photo Credit: Reuters

The Centre has devolved over ₹3.09 lakh crore to States till July of the ₹10.21 lakh crore budgeted to be transferred in the current fiscal, Minister of State for Finance Pankaj Chaudhary said on July 25.

“Out of ₹10.21 lakh crore estimated to be transferred to States for the FY 2023-24, ₹3,09,521.22 crore has been devolved till July 2023, in 4 instalments having double the normal amount in June’23 for FY 2023-24. There is no pendency on part of devolution payable to States…,” Mr. Chaudhary said in the Lok Sabha.

Of the ₹3.09 lakh crore net proceeds of shareable union taxes and duties distributed to the States, Central GST collection devolution stood at ₹94,368 crore till July.

“Part of the CGST collected and credited to the Consolidated Fund of India is devolved to the States as per the accepted recommendations of the Finance Commission. The total amount of such CGST devolution released to states during FY 2022-23 was $2,68,334.19 crore; this was released in 14 instalments,” the minister said.

The 15th Finance Commission has recommended that States be given 41% of the divisible tax pool of the Centre during the period 2021-22 to 2025-26, which is at the same level as was recommended by the 14th Finance Commission.

In reply to a separate question, Chaudhary said Goods and Services Tax (GST) has decreased the number of taxes and overall tax burden while significantly increasing transparency.

“It has resulted in the significant increase in the number of registered taxpayers. Before the GST regime, the number of registered taxpayers was around 54 lakhs, which has now increased to around 1.46 crore after the GST regime,” he said.

Union Finance Minister Nirmala Sitharaman with Revenue Secretary Sanjay Malhotra during the 50th Goods and Services Tax (GST) Council Meeting at Vigyan Bhawan, in New Delhi, on July 11, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council, at its 50th meeting on July 11, reduced or clarified the tax rate on some items ranging from uncooked or unfried snack pellets to special utility vehicles (SUVs), exempted imported drugs to treat cancer and rare diseases, and brought an end to a years-long debate on tax treatment of online gaming, casinos and horse racing.

Whether they involve skill or chance, or both or neither, bets and wagers made on all three activities, will attract a 28% levy and the GST laws will be amended to include online gaming, Finance Minister Nirmala Sitharaman said.

The Council also examined States’ proposals to set up 50 Benches of the much-awaited GST Appellate Tribunals in the country. The government has said that the statutory bodies to resolve mounting GST disputes shall become operational within four to six months, with Benches coming up in State capitals as well as places where High Courts have Benches, to begin with. The Council cleared the appointment and service conditions for tribunal members and the president, which will kick in from August 1.

The first meeting of the Council since February got off to a stormy start. Representatives of States not ruled by the BJP criticised the Union government’s recent decision to bring the GST Network under the purview of the Prevention of Money Laundering Act (PMLA), administered by the Enforcement Directorate (ED). The arguments were led by the Finance Ministers of Delhi and Punjab.

Ms. Sitharaman, who chaired the meeting, said many States had raised concerns about the issue and it was discussed after the listed agenda was concluded. Tamil Nadu, for instance, said that the inclusion of GSTN under the PMLA provisions is against the interests of taxpayers and against the basic objective of decriminalising the offences under the GST law.

Also read | Real money gaming industry reacts with shock to GST on deposits

“As this would affect the dealers across the country, especially small dealers, Tamil Nadu opposes the move,” a press statement from the State government said.

Revenue Secretary Sanjay Malhotra presented an explanation of the new provision to the Council, which he said members seemed “quite satisfied with”.

“This notification has been issued under Section 66 of the PMLA and has nothing to do with the GST law. It has been issued as it is a requirement of the Financial Action Task Force and our evaluation is under process,” he said.

Dispelling doubts that the GSTN is now going to share information about private businesses with other law enforcement agencies, including the ED, Mr. Malhotra said the ED will neither be receiving nor providing information.

“It was also clarified that this notification will empower our tax authorities with more information. The director of the Financial Intelligence Unit will provide information to the GSTN to empower the authorities wherever it feels there is a chance of tax evasion or money laundering; this information can be used as they deem fit,” he said.

The GST rate on uncooked, unfried snack pellets and fish soluble paste was slashed from 18% to 5%, while imitation zari threads or yarn will now attract 5% GST instead of 12%. The Council also decided that food and beverages consumed inside cinema halls shall attract 5% GST without any input tax credits, as opposed to 18% levied on cinema services.

The tax treatment on SUVs, which attract a higher GST compensation cess on top of the 28% GST levy, was also clarified taking into account concerns expressed by Tamil Nadu and Punjab that the higher cess levy must not affect sedans.

“Till now, for a vehicle to be categorised as SUV with higher compensation cess — four conditions had to be met. They had to be generally considered an SUV, were longer than four metres, with an engine of 1500 cc or more, and a ground clearance of 170 mm,” said the Revenue Secretary.

The Council has decided to scrap the condition that the vehicle should be popularly seen as an SUV, and clarified that the ground clearance of 170 mm should be of an unladen vehicle.

“On services, we have offered exemption on GST for satellite launch services provided by private organisations,” Ms. Sitharaman said.