PUSH pre-packaged and labeled food items such as wheat flour, puffed rice, curds/lassi/buttermilk and paneer under the GST net, removing the exemption for hotels with rent below 1,000 rupees per day and correcting the reverse duty structure for the host of items such as edible oils, coal, LED lamps, printing ink, knives and solar water heaters have were approved by the Goods and Services Tax (GST) Board on the first day of its 47th meeting on Tuesday.

Discussion on the contentious issue of extending state compensation beyond June 2022 and the 28% GST rate on casinos, online gambling and horse racing, is due to resume for deliberations on Wednesday. .

According to sources, the GST Council has also approved compliance measures for high-risk taxpayers, including mandatory biometric authentication, inclusion of electricity bill data, real-time validation of all bank accounts relative to a particular PAN and geolocation.
The mandatory generation of electronic invoices by states for intrastate transport of gold and precious stones was also approved by the Board, but the decision on the threshold was left to the states.

The correction of the inverted duty structure and the removal of exemptions were part of the interim report of the Group of Ministers on Rate Streamlining, led by Chief Minister of Karnataka Basavaraj S Bommai, which received an extension for submission of the report final. He recommended a tax of 12% on hotel rooms costing less than Rs 1,000 per day which are currently exempt, increasing the rate on services of manufacturing leather goods, clay bricks from 5% to 12% and increasing the GST on LED lights, ink, knives, blades, motor pumps, spoons, forks, dairy machines from 12% to 18%.

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It also sought to put prepackaged food products, including puffed rice, wheat flour, curd, lassi, on the same level as branded food products with a 5% tax rate. Currently, a 5% GST is levied on branded and packaged food products, while unpackaged and unlabeled food products are tax exempt. In addition, the panel suggested the withdrawal of the input tax credit refund for the reverse duty structure on edible oil and coal.
Further compliance measures to plug revenue leaks are in sight with closer scrutiny of high-risk taxpayers.

Identify the risky behavior of new enrollees/candidates using artificial intelligence and place the information on the back office for the field agent to perform mandatory physical verification of these taxpayers as well as time validation real bank accounts through the integration of the GST system with the NPCI and the inclusion of utility bill metadata (CA#) as a data field when registering new taxpayers are a few measures that will be discussed at the Board meeting.

Rate rationalization measures under the GST are being considered as the compensation scheme – under which states were offered compensation for revenue losses below the guaranteed compound rate of 14% – ends in June after five years of rolling out the indirect tax system and the GST, the weighted average growth rate being around 11.6%, compared to a revenue-neutral rate of 14.4% at the time of its rollout in 2017.

In 2021-22, only five of the 31 states/UTs – Arunachal Pradesh, Manipur, Mizoram, Nagaland, Sikkim – recorded revenue growth above the protected income rate for states under GST. Pondicherry, Punjab, Uttarakhand, Himachal Pradesh and Chhattisgarh recorded the highest revenue gap between sheltered revenue and gross state GST revenue after settlement in 2021-22. States have been guaranteed compensation at the compound rate of 14% from the base year 2015-2016 for losses resulting from the implementation of the GST, in accordance with the Commodity Tax Act of 2017 and services (state compensation).