For a long time, the council had been discussing fixing rates for lotteries in the country. Today the council took up a proposal to fix a uniform 28 percent tax rate on lottery effective March 1, 2020, all over the country.
The Goods and Services Tax (GST) Council on Wednesday refrained from any major rate hikes or restructuring of slabs, but broke the convention of consensual decision-making, to fix a uniform tax rate of 28% on both state and private lottery through voting. The new rate for lottery will take effect from March 2020.
In other rate-related decisions, the Council approved an exemption for payment of the upfront amount on a long-term lease of industrial/financial infrastructure plots by an entity having 20% or more ownership.
Earlier, the exemption was for an entity having more than 40% ownership. The panel also relaxed levy of penalty for non-filing of GSTR-1 from July 2017.
Union finance minister Nirmala Sitharaman said all attempts were made to arrive at a consensus decision on lotteries but one member (Kerala FM Thomas Isaac) suggested that rules for the division be used given the issue has been hanging fire for want of consensus.
Referring to the proposals on raising rate for GST slabs, Sitharaman said that analysis was made by the officials’ panel, which included state and Central officials. She added that it was the ‘first rough cut’ on the revenue position and various related scenarios.
Stating that states asked for more data analysis, Sitharaman said, “One state said analysis of data on, say, edible oil be compiled on consumption post rate cut. Some states wanted a complete compilation of items on which rates were reduced.”
MS Mani, partner, Deloitte India, said, “It is good to see that the rates have been left unchanged as frequent alterations create business difficulties. The focus on revenue augmentation measures could lead to several anti-evasion measures in the coming months as the decision to block input tax credit in cases of fake invoicing indicates.”
Many states had earlier opposed the idea of hiking GST rates to boost collections. West Bengal finance minister Amit Mitra urged the Centre to desist from hiking GST rates, imposing cesses and pruning the exempt category. The solution to falling GST revenue “lies not in tinkering with the rate structure but in focusing on anti-evasion and fraud detection measures”, Mitra had argued.
Tax officials have estimated that the annual GST fraud could be as high as Rs. 90,000 crore with circular trading and fake invoices being the usual modus operandi of the perpetrators.
The lottery industry has been pressing for a uniform GST rate of 12% and removal of tax on the prize money, saying the existing dual rate is hampering the growth of the business. Currently, a GST of 12% is levied on state lotteries sold within a state and 28% on those sold outside that state.
To sort out differences in the views among states, the Council had earlier constituted an eight-member group of ministers under the chairmanship of Maharashtra finance minister Sudhir Mungantiwar.
Reports had earlier suggested the government was planning to hike the GST rate of 5% to 10% and impose cess on many items in the 18% bracket. Many state finance ministers, including Bihar, Punjab, Kerala, and Madhya Pradesh, expressed reservations about proposed GST rate hikes. A comprehensive overhaul of the GST structure was uncalled for at this juncture, they noted, even some are amenable to a hike in existing cesses and/or imposing it on a few items in 18% tax bracket.