India’s GST Council fixes 28 per cent uniform tax rate for lotteries

While the all-powerful GST Council kept rates unchaged in its 38th meeting, it voted for a uniform rate of 28 per cent on both state-run and state-authorised lotteries.

During the voting, 21 states voted in favour of the uniform rate.

This is first time since the launch of the new indirect tax regime that Council has taken a decision through the voting route. Earlier, all decisions including the contentious ones, were taken unanimously.

Union Finance Minister Nirmala Sitharaman, who chairs the Council, also said that every attempt was made to keep the set tradition alive.

“Every attempt was made to convince, based on the opinion making in the house. Eventually, the Council was reminded that the rules allow (it) and that tradition is not part of the rule book. It was reminded to me that tradition was not part of rule book and the rules are what should govern the running of the house,” she said in the post-meeting press conference.

The uniform GST rate on lotteries would apply from March 1, 2020.

There are two rates prescribed on the sale of lottery tickets. Lotteries run by state governments are taxed at 12 per cent while those authorised by states and operated by private firms as well as inter-state supplies of lotteries are taxed at 28 per cent.

In a bid to facilitate development of industrial parks, the GST Council decided to exempt the upfront amount payable for long-term lease of industrial and financial infrastructure plots in case of an entity having 20 per cent or more ownership of Central or state government.

“This has been done to facilitate setting up of industrial parks by the state and Central government. This will be applicable from January 1, 2020,” said Revenue Secretary A.B. Pandey.

The GST Council did not discuss rate hike proposals during the meeting.

Many states are learnt to have taken up the issue of delay in compensation and opposed to rate hikes.

West Bengal Finance Minister Amit Mitra said that considering the revenue projections given by the Centre, there may not be enough money for compensating the states.

“Basically, the shortfall they are looking at by February next year, it appears from their projection that there will be no appropriate money for compensation,” he said.

Mitra said that there was need to plug the leakages, stop frauds and strengthen the system to augment revenue.

He expressed concern over delay in making the system robust noting that invoices are still not uplinked on the GST network even today.

“We need to tighten many many things,” he added.

With revenue shortfall emerging as a major area of concern, the Centre has set a Rs 1.10 lakh crore monthly GST collection target in the remaining months of the fiscal with Rs 1.25 lakh crore target set for one of these months.

In the past eight months of the current fiscal, only in the month of April which is considered peak collection month, the mop-up was a tad above Rs 1.10 lakh crore. In four months, the collection was below Rs 1 lakh crore mark.

Tax experts hope the monthly collection to reach the new target provided economic growth improves.

M.S. Mani, Partner at global consultancy Deloitte, said that the target was quite achievable if the economy grows at 6-7 per cent.

Decline in growth rate has impacted collection of both GST as well as compensation cess levied to make up for revenue loss to states on account of shift to the new regime. As a esult of drop in collection, the Centre has been finding it difficult to release compensation on time. While it has paid the compensation for the months of August and September to states after much delay, the release of funds for October and November remains due.

Mitra said delay in release of compensation to states was a matter of deep concern and violates the Constitutional provision.

In order to contain evasion and ensure better compliance, the GST Council took a slew of decisions.

Soon, e-way bill for taxpayers who have not filed GSTR 1 for two periods would be blocked. Input tax credit to the recipient in respect of invoices or debit notes that are not reflected in the GSTR 2A form shall be restricted to 10 per cent of the eligible credit available.

“To check the menace of fake invoices, suitable action to be taken for blocking of fraudulently availed input tax credit in certain situations,” said a Finance Ministry statement.

Meanwhile, due date for annual return in form GSTR 9 for FY 18 has been extended by one month to January 31, 2020.

Indo-Asian News Service