Breaking the tradition of consensus-based decisions in its 37 earlier meetings, the Goods and Services Tax (GST) Council voted for the first time in its 38th meeting held on December 18. The proposal to have a higher single rate for lotteries went through by a majority, with 21 votes in favour.
The GST Council is a federal body that aims to bring together states and the Centre on a common platform for the nationwide rollout of the indirect tax reform. With the precedent of voting now established, consensus at the Council could be challenged again in the future. The rules of voting in the GST Council are such that the odds are stacked in favour of the Centre in the normal course. However, in case of a vote, any disagreements within the ruling coalition at the Centre may bring its support below the three-fourths majority that is needed for the passage of a decision.
First GST Council vote
In the 38th meeting, Kerala’s Finance Minister Thomas Isaac pushed for voting on the proposal for a uniform rate for lotteries. A total of 21 members of the GST Council voted in favour of a uniform rate; seven (including Kerala, Chhattisgarh, West Bengal, Madhya Pradesh, Maharashtra, and Puducherry) voted against; and three members abstained paving the way for a single 28% rate effective March 1. Currently, a GST rate of 12% is levied for state-run lotteries and 28% for state-authorised lotteries.
After the meeting, Union Finance Minister Nirmala Sitharaman, who heads the Council, said “every attempt was made to keep that set tradition (of consensus) alive”; however, the Council was reminded that the “rules allow and that tradition was not part of the rulebook”, and voting was held on the “request of one member”.
Some members said that the voting was not a major development, since it was on the issue of a ‘sin good’ like lottery, and was mainly done on the insistence of one state.
GST Council voting rules
As per The Constitution (One Hundred and First Amendment) Act, 2016, in case of a voting, every decision of the GST Council has to be taken by a majority of not less than three-fourths of the weighted votes of the members present.
The vote of the central government has a weightage of one-third of the total votes cast, and the votes of all the state governments taken together have a weightage of two-thirds of the total votes cast in that meeting.
As of now, out of the total 30 states and Union Territories (excluding Jammu & Kashmir), 20 are ruled by the Bharatiya Janata Party or its allies (including parties who voted with the BJP on recent legislation in Parliament). This essentially means that a vote in the Council could largely be an academic exercise unless a number of the BJP’s allies switch sides.
Past record and future scope
So far, even if states voiced their differences over a proposal in the Council, all decisions had been taken by consensus in the meetings of the GST Council. Former Finance Minister Arun Jaitley had underlined that the GST Council was an excellent federal institution, in which thousands of issues were decided through consensus. But the 38th meeting, the fourth under the chairmanship of the present Union Finance Minister Nirmala Sitharaman, saw voting for the first time.
With a departure from the consensus approach having been made, there could be more instances of voting exercises going forward especially as revenue-raising measures come up in future meetings. Differences of opinion are likely to crop up on proposals to raise rates, especially of the lower slabs, in the future a concern that made most states rule out an immediate rate hike in the last Council meeting, even as they were in agreement over a broader overhaul of the GST structure.