GST Council Reconstitutes Group of Ministers for Revenue Analysis

The Goods and Services Tax (GST) Council has restructured the Group of Ministers (GoM) tasked with analysing GST revenue. This decision was made during the 55th council meeting held on December 21, 2024. The GoM aims to address sector-specific issues and explore a unified enforcement platform to combat tax evasion. The reconstituted group will be led by Goa’s Chief Minister Pramod Sawant and includes members from various states.

Background of the GST Council

The GST Council was established in 2017 when the GST was implemented in India. It comprises the Union Finance Minister and state finance ministers. The council is responsible for making recommendations on GST rates, rules, and procedures. Over the years, it has amended the GST Act to ease compliance for businesses.

Objectives of the Reconstituted GoM

The reconstituted GoM on GST revenue analysis has been given a revised Terms of Reference (ToR). Its primary objectives include: – Analysing state-wise revenue collection trends. – Identifying revenue patterns across different sectors and regions. – Reviewing revenue from inter-state transactions. – Conducting a sector-wise analysis to pinpoint issues requiring policy intervention.

Sector-Specific Focus

The GoM will discuss sector-specific challenges, particularly those affecting agrarian and smaller states. It will assess the impact of macroeconomic policies and geographical factors on GST revenues. This targeted approach aims to enhance revenue generation, especially for states experiencing shortfalls.

Unified Enforcement Platform

One of the GoM’s key initiatives is to recommend the harmonisation of anti-evasion measures. It will evaluate tools developed by various agencies, including the National Informatics Centre (NIC) and GST Network (GSTN). The goal is to create a unified enforcement and compliance platform to streamline processes and reduce tax evasion.

Current GST Revenue Trends

As of February 2025, gross GST collections have seen a growth of 9.4%, amounting to approximately ₹20.13 lakh crore. After accounting for refunds, the net collections have increased by 8.6% to ₹17.79 lakh crore. These figures highlight the importance of ongoing analysis and intervention to maintain revenue growth.

Related GoMs and Ongoing Initiatives

In addition to the newly reconstituted GoM, other groups are addressing different aspects of GST. One GoM is focused on rationalising GST rates and slabs, while another is determining the future of the compensation cess, set to end on March 31, 2026. These initiatives demonstrate the council’s commitment to refining the GST framework.

Future Implications

The reconstitution of the GoM is a strategic move to enhance GST compliance and revenue collection. Its findings and recommendations will inform future policy decisions. The emphasis on sector-specific analysis will help tailor interventions to the unique challenges faced by various states.

Questions for UPSC:

1. Examine the impact of GST on small businesses in India.
2. Critically discuss the role of the GST Council in shaping fiscal policy.
3. Analyse the challenges faced by agrarian states under the GST regime.
4. Estimate the effects of macroeconomic policies on state revenue generation.

Answer Hints:

1. Examine the impact of GST on small businesses in India.

1. GST simplifies tax compliance, reducing the burden of multiple indirect taxes.
2. Small businesses benefit from input tax credit, lowering overall tax liability.
3. However, compliance costs and the need for digital infrastructure can be challenging.
4. Some small businesses face higher tax rates compared to previous regimes.
5. Access to national markets increases due to uniform tax structure, promoting growth.

2. Critically discuss the role of the GST Council in shaping fiscal policy.

1. The GST Council, comprising central and state finance ministers, decides GST rates and policies.
2. It plays important role in amending GST laws to ensure business-friendly regulations.
3. The Council addresses disputes and promotes cooperative federalism among states.
4. It influences fiscal policy by adjusting tax structures to enhance revenue generation.
5. Regular meetings allow for timely responses to economic challenges and revenue shortfalls.

3. Analyse the challenges faced by agrarian states under the GST regime.

1. Agrarian states often have lower revenue bases, making GST compliance difficult.
2. High dependency on agriculture can lead to volatility in revenue collection.
3. Small farmers may struggle with compliance due to lack of resources and knowledge.
4. Sector-specific issues, such as crop failures, directly impact GST revenues.
5. Interstate disparities in GST implementation can exacerbate challenges for these states.

4. Estimate the effects of macroeconomic policies on state revenue generation.

1. Macroeconomic policies influence overall economic growth, impacting GST collections.
2. Changes in interest rates and inflation can affect consumer spending and business activity.
3. Fiscal policies, including government spending, can drive demand and revenue generation.
4. Economic downturns lead to reduced revenues, making states more vulnerable.
5. Policy interventions aimed at growth can enhance state revenues through increased compliance.