Summary of Key Outcomes from the 46th GST Council Deliberations

The 46th Goods and Services Tax (GST) Council convened on Friday, December 31, 2021, in New Delhi at Vigyan Bhavan. The Union Finance Minister, Smt. Nirmala Sitaraman, presided over the session. Key attendees included Union Ministers of State for Finance, Shri Pankaj Chowdhary and Dr. Bhagwat Kishanrao Karad, along with finance ministers from various states and Union Territories, and other senior government officials.

Key Decisions from the 46th GST Council Session

During a press briefing, the Union Finance Minister announced the critical outcomes of the Council meeting. She noted that this 46th session was an emergency convocation, arranged with minimal notice. The sole topic for discussion was the proposed GST rate increase for textiles.

Following a letter from Gujarat's Finance Minister on December 29, 2021, advocating reconsideration of the 45th GST Council meeting’s decision to address tax inversion in the textile industry, the Council opted to defer the planned GST increase on textiles from 5% to 12%. The Group of Ministers (GoM) was instructed to incorporate the GST rate on textiles into their ongoing study and to present their findings by February 2022.

The Finance Minister also clarified that an increase in GST for footwear was not on the agenda for this meeting. Consequently, the revised 12% GST rate for footwear was set to take effect from January 1, 2022, as previously decided. The subsequent GST Council meeting was scheduled for late February or early March 2022.

Real-time Updates from the 46th GST Council Session

• 3:25 p.m. – The Union Finance Minister held a press conference, confirming the emergency nature and brevity of the meeting. She highlighted the Gujarat Finance Minister’s December 29, 2021, letter requesting a review of the earlier decision to rectify tax inversion. The GST increase for textiles from 5% to 12% was suspended, while footwear rates remained unchanged. The GoM on rate rationalization was tasked with examining GST on textiles and reporting by February 2022. The subsequent Council meeting was planned for late February or early March 2022.
• 2:00 p.m. – Reports indicated the conclusion of the GST Council meeting and an extension for the GoM focused on rate rationalization.
• 12:56 p.m. – Sources reported the GST Council’s unanimous decision to delay the implementation of the 5% to 12% GST rate increase for both textiles and footwear. The Council intends to revisit this topic in a future meeting to establish a long-term strategy.
• 12:25 p.m. – The Finance Minister of Tamil Nadu reportedly suggested that the Council impose a 12% GST on textile garments priced between Rs.3,000 and Rs.5,000 per unit, while maintaining a 5% GST for garments under Rs.3,000 per unit.
• 12:10 p.m. – The GST Council meeting was ongoing, with an anticipated conclusion around 3 p.m., at which point the Union Finance Minister, Nirmala Sitharaman, was expected to address the media.
• 11:30 a.m. – Several e-commerce platforms involved in restaurant supplies reportedly urged the GST Council to postpone the 5% GST levy under Section 9(5) of the CGST Act.
• 11:10 a.m. – The 46th GST Council meeting commenced with the attendance of the Union Finance Minister and Ministers of State for Finance.

Anticipations Prior to the 46th GST Council Deliberations

During the 45th Council meeting, the Union Finance Minister had announced the formation of a Group of Ministers (GoM) to examine the rationalization of rates for specific goods and services. The Fitment Committee, comprising tax officials from both state and central governments, also put forth numerous recommendations to the GoM concerning changes in tax slabs and rates, including suggesting the removal of some items from the exemption list.

Since its inception, GST has operated under a four-tiered slab structure, with products taxed at 5%, 12%, 18%, and 28%. Essential items are either exempt or taxed at 5%, whereas luxury or demerit goods fall under the highest 28% slab, with some also incurring an additional cess.

It was anticipated that the GoM would require more time for final discussions on potential rate adjustments and slab mergers, leading to a likely extension of its tenure by two to three months. Additionally, there was speculation that the GST Council might reverse the planned GST increase on textiles and footwear.

States were also advocating for the Central government to prolong the GST Compensation cess beyond June 2022.

Furthermore, another GoM was established by the Council to address various issues such as e-way bills, compliance, FASTags, technological applications, compensation cess, and loophole closures. It was expected that the Council might make certain procedural decisions if this GoM submitted its report.

The Council intended to discuss strategies for increasing revenue, including potentially merging the 12% and 18% tax slabs and reclassifying some exempt products. Efforts to correct inverted duty structures for certain goods were also expected to continue, aiming to simplify the refund process.

This meeting was poised to follow the pre-budget discussions between the Union Finance Minister and state finance ministers on December 30, 2021. The 47th GST Council meeting was scheduled for June 28-29, 2022, in Chandigarh.