What are the key takeaways from the 47th GST Council meeting?

The goods and services tax collection was above ₹1 lakh crore mark for the 11th month running in May, offering a big reprieve to the central government which is in a tight spot due to external and internal headwinds. Rolled out on July 1, 2017, GST had subsumed 17 central and state levies. States now have indirect tax autonomy only on excise revenues which come from fuel and liquor and on stamp duties. And five years on, the GST regime is still evolving.

The 47th GST Council meeting was held in Chandigarh, and it ended on Wednesday afternoon with Union Finance Minister Nirmala Sitharaman addressing the media.

Giving a leg up to the unorganised sector, the Council agreed to waive mandatory registration for small online sellers. From January 1, 2023, online sellers with an annual turnover of Rs 40 lakh or Rs 20 lakh-- in case of small and select states-- will be exempt from mandatory registration under GST. The move is expected to benefit 120,000 small traders. Currently, small offline sellers are exempted from compulsory registration.

While reports suggested that there could be a 28% GST on online gaming, casinos and horse racing, treating them on par with gambling, the council decided to further deliberate on the tax rate and the method of valuation of taxation on such services. *On the rationalisation of tax rates, the council has not taken up the issue and a ministerial panel has been given three months time to submit its report.*

Let us now move on to the crucial subject of compensation to states. At the time of implementation of GST, the Centre had decided to compensate the states for any loss of revenue from the new tax for five years. The period ends on June 30. Several states, mostly ruled by opposition, have been demanding extension of GST compensation, citing two years of pandemic. However, the GST Council did not take any call on it. The proposal will likely be taken up again in the next meeting.

Meanwhile, the council has also accepted the recommendation by the group of ministers on correcting the inverted duty structure. A host of items now attract higher GST.  

For instance, LED lamps, ink, knives, blades, power-driven pumps, and dairy machinery will attract 18% GST, higher than the existing 12%. Further, the GST rate on solar water heaters and finished leather was hiked from 5% to 12%.

The GST council has proposed to withdraw tax exemptions for few items along with rate changes for few others. Exemptions have also been removed on a variety of services including hotels with a rent below Rs 1,000 a day, hospital room rents (excluding ICU) above Rs 5,000 per day and services provided by RBI, Irdai and Sebi. The council also wants all post office services, other than postcards and inland letters, book post and envelopes weighing less than 10 gm, to be taxed. However, goods that are unpacked and unlabelled are still exempt from GST.

The council has also reduced GST on some goods and services. It gave relief to the transport sector as it slashed rates on transport by ropeways and renting of truck/goods carriage where cost of fuel is included.

On whether to bring movement of gold and precious stones under the e-way bill regime, the council has allowed states to decide on the threshold above which e-way bill can be generated. The ministerial panel has recommended a threshold of Rs 2 lakh and above. 

The GST council has also decided to set up a ministerial panel to address various concerns raised by the states on the GST appellate tribunal.*