The GST Council on Tuesday gave in-principle approval to recommendations by the Group of Ministers (GoM) paving the way for eliminating exemptions on some goods and services and correcting inverted duty structures (IDS) on items such as knives, ink, finished leather, etc.

The Council has also approved reports by two other GoMs—one on e-way bills for gold and the second on system reforms. The Council will discuss another GoM report regarding online gaming, casinos, and horse racing on the second day of its meeting on Wednesday. The issue of compensation to States has also formally been included in the agenda and will be taken up on Wednesday, officials confirmed. All the decisions will be announced officially by the Finance Minister, Nirmala Sitharaman, on the same day.

According to official sources, the first day of the meeting saw the council accept the interim report by the GoM on rate rationalisation and correction of IDS. It was chaired by Karnataka Chief Minister BS Bommai. IDS refers to higher duty on inputs and lower duty on finished products, which leads to refunds and put a burden on the exchequer.

Though the report of GoM has not been made public, sources confirmed that GoM has recommended correction of the inverted duty structure on printing, writing/drawing ink, LED lights, fixtures, lamps, solar water heaters, finished and composition leather, work contracts supplied to the government, and tailoring and other job works for textiles. Rates for all these will go up. The GoM is also said to have recommended the withdrawal of exemptions for reinsurance of some insurance schemes, transportation of newspapers, rail equipment by rail and road, and services by the Reserve Bank of India, the capital markets and insurance regulators, among many others. Here too, rates will rise.

E way bill for gold

A source confirmed that a report by GoM to examine the feasibility of implementation of the e-way bill requirement for movement of gold and precious stones was discussed and approved. The GoM recommended that the States should be allowed to decide about the imposition of the requirement of an e-way bill for intra-State movement of gold and precious stones within their states. There will be a minimum threshold of ₹2 Lakh and the States can decide any amount, including or above this amount, as the minimum threshold for generations of e-way bills for intra-State movement of gold/precious stones in their State.

Only part “A” of the e-way bill will be required to be filled in such cases, without any need to fill in Part ‘B’ of the e-way bill. Further, modalities for the generation of e-way bills for intra-state movement of gold and precious stones will be as suggested by NIC/GSTN. While finalising the amendment in the rules, it is to be ensured that in the case of the supply of gold by registered persons to unregistered buyers, the requirement of e-way bill generation is mandated on registered suppliers only, the recommendations said.

Meanwhile, the Council deferred the proposal to exempt small businesses from mandatory registration to do business and to allow composition scheme businesses to also do business through e-commerce operations. It also agreed to further study the crypto ecosystem before deciding to levy GST.

Agenda For Wednesday

The second day of the meeting will see a detailed discussion on compensation to the States, which is coming to an end on June 30. Opposition-ruled states are pressing for an extension at least for three more years. The Finance Ministry notified the extension of the levying of compensation cess under the GST regime till 2026. However, this does not mean States will continue to get a compensation until that period. Money collected through cess between July 1, 2022 and March 31, 2026 will be used to repay principal interest and pay interest for borrowing Rs. 2.69 lakh crore that was used to compensate for revenue shortfall in FY2020-21 and FY 2021-22.