The GST Council has become synonymous with cooperative federalism. The Council has members from at least 11 political combinations with one led by the BJP and others led by opposition parties such as the Congress, JTMC, JD(U)-RJD, TRS, and AAP. All these combinations have a lot of ideological differences and fight each other on various issues. However, at the Council meeting, a non-BJP State often supports a plea by an opposition-ruled State. 

This happened during the 51st GST Council meeting, on August 2, 2023, when Goa (BJP ruled) and Sikkim (BJP is a part of ruling alliance) called for a review of 28 per cent on the entire face value as against Gross Gaming Revenue (GGR or service fee charged) in the case of casinos as this will hurt their interests considering they are small States. Andhra Pradesh (YSRCP ruled) pitched in, saying there should be a “large heart” and the valuation base should be considered. This led to the agreement that a new rate mechanism will be reviewed six months after implementation. 

This is just one example of consensus building in the Council. Barring one, the nearly 1,200 decisions taken so far at 52 meetings (the first held over September 22-23, 2016, and the 52st on October 7, 2023) by the Council has been by consensus. Only the GST on lottery was decided on voting. 

This is not to say the decisions have been unanimous. However, the Council has worked its way out of the differences by referring the matter to the Group of States’ Finance Ministers (GoFMs) to arrive at a mutually acceptable decision. The Council has always abided by GoFMs’ recommendations. A case in point is the cess to provide relief to the sugar industry, a politically sensitive issue likely to benefit many States. But the GoFM’s opinion was that the time was not the right time for such a move, and the Council agreed. As former Revenue Secretary Ajay Bhushan Pandey says, “…they rise above varied interests and collectively take decisions keeping in mind what is good for the country and what is good for the State, and how the balance can be maintained.” 

What lies ahead 

There are three major challenges: Curbing fraudulent use of invoices through fake identities and other means, rate rationalisation, and States’ response in the wake of 2022 Supreme Court observations. The magnitude of the first challenge can be gauged in the answers given by the Finance Ministry in the Lok Sabha recently. It said that the Central GST Administration had detected over 5,000 cases of fake GST registration by misusing PAN/Aadhaar details of other people to claim ITC during July 1, 2017 to June 30, 2023. It involved evasion of over ₹27,000 crore. A total of 331 arrests have been made.

Further, as a result of a special drive by the Centre and States against fake registration, started on May 16, a total of 9,369 entities were identified. The drive detected evasion of ₹10,902 crore. However, the recovery totalled just ₹45 crore, with seven persons arrested, 

The next big challenge for the Council is lowering the number of GST rates, popularly known as rate rationalisation. As on date, there are four primary rates (5, 12, 18 and 28 per cent) and four secondary rates (0, 0.25, 1.5 and 3 per cent). There is also an issue of Inverted Duty Structure or IDS (higher duty on inputs and lower levy on output). A GoFM was constituted, but barring a few recommendations on IDS, it is yet to give a final report as it is waiting for a new convenor. 

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