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GST Council Meeting 18-20 Oct : What to Expect

GST Council meeting

The all-important three-day meeting of the GST Council, is scheduled for October 18 to October 20th, which will decide on the GST tax rates and other items including

1. Calculation of tax revenues to estimate compensation to states for likely loss in revenue.
2. Issue of Dual Control over Assessees
3. Control Over Service Tax Assessees
4. Applicable rates of GST
5. Exemptions and negative lists

With the finance ministry setting November 22 as the deadline for building a consensus on all issues in the Council, the upcoming meeting is significant as it will decide on its most crucial aspect, which is the tax rate that will have a bearing on the common man.

There seemed to be consensus on Issues related to Dual control and assessment of 11 lakh Service tax payers by the centre in the first Council meeting, however, a few states led by Uttar Pradesh raised an objection to it in the second meeting. Finance Minister Arun Jaitley did not put the matter to vote as he wanted all decisions by consensus. It will be interesting to note if council can resolve all differences in the meeting or matters are decided by vote.(Centre has 1/3rd  voting rights and 2/3rd  voting rights are equally divided among all states )

At its previous meeting last month, the GST Council, which has all state finance ministers as members, had finalised area-based exemptions and how 11 states, mostly in the North-East and hilly regions, will be treated under the new tax regime.

The finance ministry will try and get a final decision on these key issues to enable subsequent Central GST (CGST) and Integrated GST (IGST) legislations to be introduced in the Winter Session of the Parliament that will begin on November 16.

Last year, a panel headed by the Chief Economic Advisor, Arvind Subramanian, had suggested a standard rate of 17-18 percent for goods and services in bulk, while recommending 12 percent for low rate goods.

Another 40 percent rate  was suggested for luxury cars, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 percent.

Finance Minister Arun Jaitley last week said “The indirect tax regime that we are planning, the rate of taxation on such products which are going to be environmentally unfriendly would be distinct from the normal rate of taxation. This is one of the proposals being discussed,” thus the tax on non-environment-friendly products can be expected to be higher than standard rate.

As for the formula for the Centre compensating loss of revenue to states, following alternatives have been discussed but final decision is to be taken

  1. State can be compensated if the revenue under GST falls short of the average tax earnings in the best three years out of the past five years.
  2. Out of past five years, two outliers are left out and an average is taken. If the revenue under GST is short of this, then States get compensated.
  3. A base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then the state gets compensated. If this alternative is selected , it has been decided that base year would be 2015-2016
  4. Lastly, a fixed rate of revenue growth can be decided and States to get compensation if revenue is less than projected revenue as per the growth rates. We expect this to be unlikely as it transfers too much burden of uncertainty on the centre if there is any slowdown in the economy.

So far, as many as 6 issues have been settled by the GST Council, including finalisation of rules for registration, rules for payments, returns, refunds and invoices.

The clock is ticking and we hope that most of the issues will be resolved in the upcoming meeting as it is crucial if we are to meet the April 1 2017 deadline for implementation of GST.

 

1 Comment

  1. Amrita Agarwal says:

    GST rates must be decided immediately AND there should be only two rates say 15% and 30% to make it revenue neutral rates. To save small traders and msme compounding scheme should be available upto turnover of 2 crore and 50% exemption to msme for a turnover upto 10.00 crore. There must not be left any room for corrupt officers

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