Federal indirect tax body, the Goods and Services Tax (GST) Council, is likely to leave tax rates unchanged at its meeting on Wednesday and instead, will explore maximising the realisation of revenue by checking tax evasion, three people aware of discussions between union and state governments said.

T S Singhdeo, Chhattisgargh minister for public health and commercial taxes (GST) told reporters here after a meeting with union finance minister Nirmala Sitharaman ahead of the Council meeting that GST rate change proposals are unlikely to be discussed at the meeting. Prior to any tax rate changes, revenue realisation should be optmised at existing tax rates by addressing areas of revenue leakage, the minister said.

Another senior official of the union finance ministry, who spoke on condition anonymity, said the central government has informed states that this is not the opportune time to raise GST rates.

Delhi deputy chief minister Manish Sisodia said raising GST rates is a knee jerk reaction that will affect consumers. The buzz about a tax rate increase had become louder after the Council recently sought views from states on reviewing the rates and on ways to raise tax receipts.

GST Council will, which meet in the afternoon, will seek ways of plugging revenue leakage, improving the efficiency of the GST system using technology and examine specific steps to augment revenue as advised by a panel of officials led by revenue secretary Ajay Bhushan Pandey.

Pandey had urged senior officials of both the direct and indirect tax administrations on Monday to achieve revenue targets while making sure that no tax payer is troubled. The central government has set a GST revenue target of ?4.5 trillion for the next four months.

The decision not to raise GST rates comes after official data released last week showed that consumer goods output had contracted by 18% in October, its fifth straight month of contraction. The industrial output data showed that the contraction in consumer goods production was deeper than the nearly 10% de-growth seen in September.

At a press briefing last week, union finance minister Nirmala Sitharaman declined to directly answer to a question on the possibility of GST rate changes, saying there was buzz everywhere about it, but not in her office. Experts said that GST being a tax on consumption, it is natural for tax collections to dip when the economy is going through a slowdown due to declining consumption.

The central government has diffused the tension in centre-state relations by releasing GST compensation of over ?35,000 crores to states earlier this week. Although states get compensation for any shortfall in their GST receipts benchmarked against an agreed 14% annual growth, the central government’s overall revenue shortfall adversely affects states too. States are currently entitled to 42% of the central government’s overall direct and indirect tax receipts. States take into account the union government’s tax revenue projections while planning their spending for the year. (ends)