28.07.2022: Day after Pinarayi’s GST relief, FinMin Balagopal says conditions apply

A day after Chief Minister Pinarayi Vijayan announced that the state government will not implement the new 5 per cent GST on select food items, Finance Minister KN Balagopal tried to set things straight, saying cereals, pulses and flour kept by shopkeepers in unbranded packages for customers’ convenience will not be taxed.

Claiming neither the CM nor he had said there would be a blanket exemption from the tax, Balagopal clarified their statements were aimed at preventing a price rise of food items that were recently included in the GST ambit. “The 5 per cent GST will not be applicable on sale of pre-packaged commodities by small-scale traders, including private shops, state-run Triveni and Supplyco outlets and agencies like Kudumbashree. However, traders should not misuse this relaxation,” he said, adding that the government is aware that its move may face legal issues or invite opposition from the Union government.

“The government does not want a tussle with the Centre,” Balagopal said. There was no immediate plan to legislate on GST and legally exempt traders from paying SGST, the state’s share of GST, he said. “We are studying the Supreme Court’s ruling on May 19 that the Parliament and states can legislate on GST,” said Balagopal. He expressed hope the Centre would rethink its stand on the issue. He also said Kerala will raise the matter at the GST Council meeting. 

Balagopal hinted that officers of the state GST department or legal metrology department will not book traders who violate the new taxation in good faith. However, he did not say anything about the other possible threats traders may face. Central GST offices in Kerala have as much power for surveillance and enforcement as their state counterparts and traders booked by them may face penalty and even cancellation of GST registration. State-run Triveni and Supplyco are at high risk as their business volume is high. So, an assessment based on their annual sales will result in huge penalties.  

The state’s nod for an ‘open defiance’ of the taxation rule may invite criticism from the Comptroller and Auditor General. Officers identified for lapses in enforcement may face legal issues. The state may also be excluded from financial incentives for GST reforms.  

The finance minister said the state’s intervention is aimed at preventing traders who do not fall in the new tax net from fleecing customers in its name. “Around 75-80 per cent of Kerala’s traders are either out of the tax net (those with annual turnover upto `40 lakh) or those who pay tax under the composition scheme. The latter scheme is for traders with an annual turnover of upto `1.5 crore. They have to pay flat 1 per cent of the turnover as tax. Traders in these two categories cannot levy tax from customers,” Balagopal added. Meanwhile, Leader of Opposition V D Satheesan on Wednesday criticised the state government for not taking steps to exempt Kerala from the new GST on select food items. 

“The Opposition had demanded the exemption first. The demand was based on the Supreme Court’s ruling that the GST Council’s decisions could not be thrust upon states. Though the finance minister told the assembly that the new tax will not be implemented in Kerala, the government did not issue any order,” he said. 

Source: The New India Express

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