NEW DELHI: The much-anticipated 47th Goods and Services Tax (GST) Council meeting, which will focus on GST rate restructuring and the extension of the GST compensation cess, is now expected to take place in the first week of May, once Union Finance Minister Nirmala Sitharaman returns from a 10-day visit to the United States following the World Bank-IMF meeting earlier this month.

The extension of the GST compensation cess to states, one of the numerous issues on the Council's agenda, could become a divisive issue if the government refuses to acquiesce to the request, considering the strident demand from some opposition-ruling states.

The states have urged the Centre to extend the GST law's five-year compensation period before it expires at the end of June. Any attempt to extend the GST compensation deadline will necessitate a modification to the Indian Constitution, which will have to be debated in the next legislative session, because under the Constitution's 101st amendment, states can only be compensated for five years, beginning in 2017.

Any denial of such a request would have a significant impact on state income, forcing them to charge special cess on commodities that are outside the GST Council's purview, such as the Covid Cess imposed by the states of Jharkhand and Kerala. States are currently entitled to full compensation for the first five years following the implementation of GST, based on a revenue growth rate of 14% from the base year of 2015-16. Over the peak rate of 28%, a compensation cess is imposed on luxury and sin commodities such as aerated beverages, coal, pan masala, cigarettes, and vehicles.

According to reports, the GST Council is also considering simplifying the tax system by rationalising tax rates and correcting the inverted duty structure, in which the duty on finished goods is significantly lower than the duty on the raw materials and intermediaries used to manufacture the product.

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