The GST Council, on the last Saturday, addressed numerous ambiguities in tax treatment that have persisted since the launch of the indirect tax regime in July 2017.
Stressing on the outcomes of the recent GST Council meeting, analyse what more can be done to address the concerns that still hamper the effective implementation of GST. (10 Marks, 150 words)
Outcome of the recent GST Council Meeting:
- Notably, the council reduced the GST on molasses from 28% to 5%, aiming to reduce cattle feed costs and improve cash flows for sugar mills to expedite payment of farmers’ dues.
- Beyond rate adjustments and clarifications, a significant decision was made not to impose taxes on extra neutral alcohol (ENA) used in alcoholic beverages.
- As alcohol for human consumption remains outside the GST framework, the levy on ENA, a crucial ingredient, could not offset state levies on the final product. This issue, which has been a source of industry uncertainty, received much-needed clarity.
- It is encouraging that the Council, after meeting only twice in 2022, convened four times this year, addressing anomalies in recent decisions.
- The alignment of age norms for the president and members of the long-awaited GST Appellate Tribunals with other tribunals, though a previously overlooked aspect, is now resolved, potentially leading to their operationalization.
Concerns that remain:
- However, the primary concern for consumers and producers lies in the Council’s commitment to convene exclusively for “perspective planning” on GST Compensation Cess and potential alternatives to it.
- Originally presented as a time-bound charge atop the concept of a ‘Good and Simple Tax’ to compensate states for revenue losses during the initial five years of GST, the extension of the Cess on demerit goods like aerated drinks, tobacco products, and automobiles until March 2026 was triggered by the adverse impact of the COVID-19 pandemic on tax collections.
- Unfortunately, the rationalization process, initiated two years ago, remains unaddressed despite strong revenue inflows in recent times.
While discouraging certain goods with negative impacts may be a valid objective, introducing a new cess should not be an isolated action; instead, it should be part of a broader effort to rationalize the complex multiple-rate structure of GST. Beyond addressing frequent issues, the GST system requires a comprehensive reform plan, including a roadmap for the inclusion of previously excluded items such as electricity, petroleum, and alcohol.