The change of guard after the Assembly election in Karnataka and the Ministerial council shuffle in Tamil Nadu has triggered the need for the Goods and Services Tax (GST) Council to reconstitute at least three Ministerial panels tasked with recommending critical reforms of the indirect tax regime.
Basavaraj S. Bommai, who resigned as the Chief Minister of Karnataka on Saturday, was the chairperson of the GST Council’s group of ministers (GoM) tasked with the rationalisation of GST’s complex rates’ system with multiple tax slabs.
New convenor needed
The panel, formed in September 2021, initially had a two-month deadline. With inflation running high through 2022-23 and remaining a concern, the government has been going slow on the GST rate rationalisation agenda. Sweeping structural changes would likely mean higher tax rates for several items.
Mr. Bommai’s exit from power will mean the Council would have to appoint a new convenor for the panel, that also had Ministers from six other States, including Kerala Finance Minister K.N. Balagopal.
Palanivel Thiaga Rajan, the former Finance Minister and current IT minister of Tamil Nadu, was also involved in two of the Council’s GoMs — one tasked with GST’s IT system reforms to tackle evasion, and another on the appropriate tax treatment to be adopted for casinos, online gaming and horse-racing.
Mr. Thiaga Rajan will most likely be replaced by the new State Finance Minister Thangam Thennarasu, going by the practice adopted by the GST Council for GoM membership changes due to external factors.
Political changes
Usually, a Minister from the same State is added into the Council’s panels due to any changes in State governments, but there have been occasions when this principle has not been followed. For instance, the GoM on casinos and online gaming was initially chaired by former Gujarat Deputy CM Nitin Bhai Patel, but Meghalaya Chief Minister Conrad Sangma was later given charge of the panel, though the State originally had no representative on the panel.
Incidentally, erstwhile Bihar Deputy Chief Minister Tarkishore Prasad was also part of the GoM convened by Mr. Bommai, but there has been no official communique of any other member being included in the panel after August 2022, when Mr. Prasad exited as a result of Nitish Kumar’s Janata Dal (United)-led State government switching alliance partners.
The panel is also tasked with proposing corrections to the inverted duty structures that had crept into the GST regime, and an interim report on these corrections was presented to the Council in June 2022, where most of its recommendations were accepted. An inverted duty structure means that inputs attract higher taxes than the final product.
