Rate rationalisation & states' revenue compensation on cards

New Delhi: The all-powerful GST Council at its meeting in Chandigarh this week is likely to make changes in goods and services tax (GST) rates on a handful of items and may go with the officers panel's recommendations to maintain status quo in rates of over 215 items.

The 47th meeting of the GST Council, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and UTs, is scheduled for June 28-29. The Council is meeting after a gap of six months.

Apart from rate rationalisation, the Council is expected to see a stormy discussion around compensation payout to states with Opposition-ruled states aggressively pushing for its continuation beyond the 5-year period which ends in June.

Major changes proposed by the Fitment Committee in the tax rates are a uniform 5 per cent GST rate on prostheses (artificial limbs) and orthopaedic implants (trauma, spine, and arthoplasty implants). Besides, orthoses (splints, braces, belts and calipers) too have been proposed in the lowest bracket of 5 per cent. Currently, these goods attract tax rate of either 12 and 5 per cent. The committee has also recommended reduction in GST rate on ropeway travel to 5 per cent from 18 per cent currently with ITC, Himachal Pradesh placing this request before the GST Council in September last year.

It also suggested that GST rate on ostomy appliances (including pouch or flange, stoma adhesive paste, barrier cream, irrigator kit, sleeves, belt, micro-pore tapes) should be reduced to 5 per cent, from 12 per cent at present.

Also, tax rates on sewage treated water is likely to be cut to 'nil'. Currently, an ambiguity in wordings in the GST rates slab has led to two orders from Authority for Advance Ruling (AAR) stating that sewage treated water attracts 18 per cent GST rate. The Fitment Committee also recommended tax rate be hiked on Tetra Pak to 18 per cent, from 12 per cent currently.

Also, a clarification would be issued on GST rates on electric vehicles, to state that EVs, whether fitted with battery or not, would attract 5 per cent tax rate. Besides, Nicotine Polarilex Gum attracts 18 per cent GST, the committee has clarified.

Besides rate rationalisation, the Council is likely to see Opposition-ruled states pushing for continuation of compensation for revenue loss. After the 45th GST Council meeting in Lucknow in September last year, Sitharaman had said the regime of paying compensation to states will end in June 2022.

However, the compensation cess, levied on luxury and demerit goods, will continue to be collected till March 2026 to repay the borrowings that were done in 2020-21 and 2021-22 to compensate states for GST revenue loss.

Moreover, the GST Council in its meeting this week is likely to vet a proposal of the panel of state finance ministers on levying 28 per cent GST on online gaming, casinos and horse racing, sources said. The Group of Ministers, headed by Meghalaya Chief Minister Conrad Sangma, has recommended that online gaming should be taxed at full value of the consideration, including contest entry fee paid by the player on participating in the game.

In case of race courses, the GoM has suggested that GST be levied on the full value of bets pooled in the totalisators and placed with the bookmakers.

In casinos, GoM recommended that the tax would be levied on the full face value of the chips/coins purchased from the casino by a player. No further GST would apply on the value of bets placed in each round of betting, including those placed with winnings in previous rounds. Also, the GoM suggested that 28 per cent Goods and Services Tax be levied on entry/access fees into casinos, which compulsorily includes foods/beverages etc.

However, optional supplies, made independently of the entry tickets, would be taxed at the rate applicable on such supplies, sources added.

Currently, services of casinos, horse racing and online gaming attract 18 per cent GST. The GoM would decide on the method of valuing the services.