The decisions of the 55th meeting of the GST Council are an elaborate exercise in rate tinkering, with a bias more towards raising revenues than providing tax relief. For an exercise that began seven years ago to simplify the indirect tax system, there is no escaping the impression that the GST Council is moving the other way. The Council has made over a dozen changes in tax rates, mooted a handful of steps to improve trade facilitation and still more by way of amendments to the GST Act. In this clutter, some positives and negatives stand out. Overall, businesses and the common man may feel short-changed.

A decision on exempting health insurance from GST has been too slow in coming. Nor has the transition out of compensation cess been worked out. On the positives, these include a serious intent to make the registration process easier for small entities; affirming that vouchers as well as supply of goods warehoused in a Special Economic Zone or Free Trade Warehousing Zone are not taxable; providing compliance relief to those under the composition scheme on rented property; and clarifying that no GST is payable on penalty levied by banks and NBFCs on borrowers. However, the Council has generated confusion on some counts. This includes its apparent reversal of the Supreme Court ruling a few months ago in the ‘Safari Retreats’ case, which is likely to hurt the construction sector. The proposal to tax used cars sale at 18 per cent on the margin between purchase and sale price has given rise to a number of queries on whether this should be taxed, the calculation of the levy and the transactions to which it can apply.

The Council has gone to great lengths to work out three different rates (5, 12 and 18 per cent) for various types or popcorn, packaged and/or unpackaged. Such hair-splitting goes on even as a rate rationalisation panel is yet to finalise its work. It betrays an impression that the GST Council is guided by revenue maximisation. It seems to decide easily on revenue raising measures (used cars), but is reluctant to let up on foregoing revenues (health insurance).

On the Safari Retreats case too, the Council has shown remarkable alacrity in trying to stall the apex court ruling simply because of the construction sector revenues to be had. This is even as it has sought time for deliberations on a host of other issues. The issue here is whether construction inputs are eligible for input tax credit. The Odisha High Court in 2018 had ruled that ITC can be availed if the developer rents out his facility, since he is providing a service. The SC upheld this interpretation. But the Council has decided to moot an amendment, with retrospective effect, to Section 17(5) (d) to clarify, in effect, that ITC can be claimed only if the contractor concerned uses it for constructing another building. This rules out ITC on construction in most cases. In sum, the Council must not lose sight of what GST was initially conceived to be — a good and simple tax.