GST Council to meet on Friday ahead of key tax changes taking effect

The 46th meeting of the Council will be held in the national capital where members will be physically present, said a person familiar with the development. State ministers will also be attending a pre-budget consultation with union finance minister Nirmala Sitharaman on Thursday. 

Friday’s Council meeting is significant given that several industry representatives had sought relief on the tax rate changes in the textile and footwear industries scheduled to kick in from 1 January. The two sectors are large employers and have many small businesses.  

The Council decided for the rate changes at its last meeting in September to correct the tax anomaly called inverted duty structure—a situation where tax outgo on raw materials is more than that on the finished products. As per this, 18 items including, woven fabrics of cotton, silk and wool, coir mats, matting and floor covering, apparel and clothing accessories of sale value upto Rs. 1,000 and footwear priced upto Rs.1,000 a pair are to move from the 5% slab to 12% slab.    

In addition to this, several other changes meant to boost tax compliance including full denial of input tax credit in cases where suppliers have failed to meet the reporting requirements and introduction of restrictions on filing returns related to sales in cases of default in filing tax returns for the previous tax period are to come into force in the new year. It remains to be seen whether the Council will offer a relief on these measures.  

The GST Council is also expected to take stock of the revenue position of central and state governments.  

The finance ministry said in a tweet on Wednesday that Sitharaman will chair the pre-budget meeting for upcoming Union Budget 2022-23 with finance ministers of all states and union territories (with legislature) in New Delhi on Thursday. The government has also kicked off a drive to crowd-source suggestions for the union budget.