Kerala Kaumudi Online
Monday, 04 July 2022 11.23 AM IST

No relief on tax burden


The decision of the three-judge bench of the Supreme Court that the Central and State Governments are not obliged to accept the decisions of the GST Council as such cannot be expected to bring about immediate changes in the unified tax structure of the country. The ambiguity on the issue continues even after the court verdict. The Centre is sure to appeal against the verdict in the wider bench anyway. The GST Act came into force on July 1, 2017 after lengthy deliberations and discussions. The law has undergone reforms over the past five years. All this is on the recommendation of the GST Council comprising Union and State Finance Ministers. The final decision on tax determination and structure rests with the Council. Decisions are usually approved by the Centre and the states. No decision has yet been taken on the path of confrontation as any decision will be based on the views expressed in the joint discussions.

The Supreme Court has ruled that both Parliament and Legislatures have the power to legislate on tax-related matters. Neither the Centre nor the states should act as if one is inferior to the other. The GST Council should take appropriate action to resolve disputes. Both the Centre and the States are obliged to approve the decision of the Council. Given the objective assessment of this judgment of the Supreme Court, it is unlikely that there will be any fundamental changes in the GST structure. Top officials in the central finance ministry say the same.

Despite this central position, the ruling parties, including Kerala, are of the view that the ruling will have a far-reaching impact on the country's tax structure and Centre-state relations. From the outset, these states have accused that many of the decisions favour the Center. With the implementation of GST, these states also suffered huge losses in tax revenue. The central guarantee of five years' compensation to the states expires next month.

In the light of the Supreme Court ruling, it can be assumed that the states will be able to move forward with some measures to increase tax revenue. States like Kerala can raise revenue by levying higher taxes on their own products and services than they currently have. Consumer state Kerala has not benefited much from the GST reforms.

Attempts are being made to revise the GST structure itself. The plan is to increase the slab from 5 per cent to 8 per cent and from 12 per cent to 18 per cent. There does not seem to be any relief from the skyrocketing fuel prices. Despite persistent complaints, the Centre is yet to bring the fuels under GST. The central policy is to squeeze the people as much as possible. The situation is unpredictable if more products are included in the higher tax slabs.

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