10 Things about 3 days GST council meeting (16th Oct to 19 Oct 16)

By | October 20, 2016
(Last Updated On: October 20, 2016)

10 things to know about GST council meet

The Centre is bracing for a testy debate after it proposed a cess on sin goods to compensate states for losses arising from a transition to the tax.

The three-day meeting of the goods and services tax (GST) council ended on Wednesday with no consensus on the GST rate. The Centre had proposed four different rate structures at the council’s previous meet a day earlier. It worked out a compensation formula for states and is now bracing for a testy debate on rates.

1. The central government proposed a four-rate structure comprising two standard rates – 12 per cent and 18 per cent – and the lower rate of six per cent for essential goods.

2. The Centre has proposed a tiered rate structure with the levies varying from four per cent for commodities like gold to 26 per cent plus cess on so-called sin goods.

3. The council is looking at a peak rate for demerit goods such as ultra-luxury items, tobacco products, pan masala – as well as environmentally-harmful products in order to equalise the levy to the current level of tax.

4. The proposed standard rates extend to a majority of the taxable goods, while the lower tax slab of six per cent includes a five per cent value-added tax levied by the states, but no excise duty is levied by the Centre.

5. However, the Centre seems caught on the wrong foot after it proposed a cess on sin goods to fund the compensation to be paid to states for losses arising from a transition to GST. It is likely to emerge as a key point of disagreement between the Centre and the states as the latter have always opposed the levy of central cess excluded from the divisible pool of taxes.

6. Four alternative options for rates have been worked out by the Centre. The finance minister said the rate structure would guard against inflationary pressures and revenue losses to the exchequer. Around 50 per cent of the items in the retail inflation basket will be exempted from GST.

7. The Centre pegs the total compensation to states for losses arising from a transition to GST at around Rs 50,000 crore in the first year. Of this, Rs26,000 crore will come from the corpus generated by the levy of the clean environment cess and the balance will be collected from the cesses levied on demerit goods such as tobacco, luxury cars, pan masala and aerated drinks. For the special category hill states and the Northeast, the exemptions will be included in their revenues while computing compensation.

8. The cess will be levied over and above the 26 per cent GST rate, as per the Centre’s proposal, said revenue secretary Hasmukh Adhia. Opposing the proposal, Kerala finance minister Thomas Isaac tweeted that the central government wants to impose a cess on GST to compensate the states – in contradiction with the concept of GST itself.

9. The GST council decided that the base year for calculating the compensation figure will be 2015-16. A uniform growth rate of 14 percent for all states will be assumed for calculating the revenue due to the states and the shortfall, if any, from a transition to GST.

10. Besides the indirect tax collections of the Centre and the states, the taxable base will also include the revenue from the two per cent central sales tax.The council will now resume discussions on November 9-10. The finance ministry  had earlier stated it would try to get a consensus on all issues to push through Central GST (CGST) and Integrated GST (IGST) legislations in the Winter Session of Parliament beginning November 16.

Jaitley had said once the rate structure was finalised, the technical group of officers would decide categories for the goods and services. The council would then take up the inconclusive item of the last meeting with regards to cross-empowerment.

Differences aside, the country has moved a step closer to the rollout of the GST, the deadline for which is April 1 – and the tax will, for the first time, economically unify India, reiterated finance minister Arun Jaitley.

Source Dailyo[20.10.2016]

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