End of consensus as GST Council takes voting route

States are concerned about falling revenue collection amidst the economic slowdown and they fear that the Union government may default on paying their dues.
Finance minister Nirmala Sitharaman (right) with revenue secretary Ajay Bhushan Pandey in New Delhi on Dec18, 2019. (ANI photo)
Finance minister Nirmala Sitharaman (right) with revenue secretary Ajay Bhushan Pandey in New Delhi on Dec18, 2019. (ANI photo)
Updated on Dec 19, 2019 01:32 AM IST
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Hindustan Times, New Delhi | By

In a marked departure from its tradition of taking consensus-based decisions to settle all matters, the Goods and Services Tax (GST) Council on Wednesday resorted to voting for the first time since its inception to levy a uniform 28% tax on both state-run and state-authorised lotteries.

“On the issue of tradition, I just want to recollect that every attempt was made to keep the set tradition alive. But eventually, the council was reminded that rules allowed for voting, and the tradition was not part of the rule book,” finance minister Nirmala Sitharaman said after the 38th meeting of the council.

One of the members present at the meeting said on condition of anonymity that 21 members voted in favour of imposing a uniform 28% rate on both state-run and state-authorised lotteries. Seven opposed it and three of them abstained.

Sitharaman said the matter was voted on because of one member. “It was not imposed by [the] council, not by me, but one member,” she said.

“The new rate will be applicable from March 1, 2020,” revenue secretary Ajay Bhushan Pandey said. Currently, state-run lottery attracts 12% GST while the levy on state-authorised lottery is 28%. The lottery industry has been demanding a uniform GST rate of 12% and tax exemption on the prize money.

The issue of two different taxes on lottery has been an old one and the council had constituted an eight-member group of ministers under the chairmanship of Maharashtra FM Sudhir Mungantiwar to sort out the differences among states.The council had also decided to seek legal opinion of the attorney general on the issue.

Giving details of the council’s decision on Wednesday, Pandey said the tax rate on woven and non-woven bags and sacks of polyethylene or polypropylene was fixed at 18%. Also, an exemption has been given on long-term lease for industrial plots to facilitate setting up of industrial parks, he said. These changes will be effective from January 1, 2020.

The GST Council will deliberate further on the issue of revenue augmentation. Officials of the Centre and states made a presentation on the issue, but the council asked them to work on specific details related to the impact of tax cut on consumption and GST collection, he said.

States are concerned about falling revenue collection amidst the economic slowdown and they fear that the Union government may default on paying their dues, another member mentioned representing an opposition-ruled state said requesting anonymity.

Pratik Jain, partner & leader, indirect tax, PwC India, said: “The GST rate increase to 28% on lotteries is in line with the principle that the rate should not depend on the status of the seller or the buyer. One would hope that the council won’t have to resort to voting frequently.”

Abhishek Jain, tax partner, EY, said: “With no increase in rates, the industry would be well relieved, especially in light of the current economic slowdown.”

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Friday, January 21, 2022