Several key issues on table as GST Council meets
03 Nov 2016
The third meeting of the General Goods and Services Tax (GST) Council beginning today is expected to arrive at a consensus on unified GST rate structure as also the extent of central support to states for loss of revenue during the transition period.
Union finance minister Arun Jaitley is chairing the meeting of the GST Council, during which representatives of state governments and union territories will deliberate on the modalities of achieving these major objectives over the next two days.
The GST Council meeting, which is barely a fortnight ahead of the winter session of Parliament, will deliberate on issues like the tax rate, including the levy of cess and sort out the vexed issue of jurisdiction over assessees.
The two-day meeting is likely to arrive at a consensus on the crucial issue of fixing tax rates so as to initiate the next steps and ensure the rollout by 1 April 2017.
The previous meeting of the GST Council, the apex body overseeing the implementation of the GST could not agree on the issue of the standard rate and the levy of cess to compensate for revenue loss to states.
The centre was keen on a four-tier GST rate structure - 8, 12, 18 and 26 per cent - the last being the tax rate for consumer durables, with an additional disincentivisation levy for goods like tobacco and liquor.
The council is helped by a team of senior bureaucrats, academics and economists.
''Most of the issues are if one can say in the last leg of discussion. States have genuine concerns and will have to be addressed for the success of GST,'' a senior official in Finance Ministry said.
GST will become effective from April 1, 2017.
With no clarity as yet on the rate cut and its modalities, small traders are still a worried lot. The GST Council is also expected to bring clarity on these, besides educating the stakeholders.
The GST Council will look into these and many other similar concerns of businesses that will be impacted, by the introduction of GST.
There are also political compulsions that continue to have a sway over economic considerations and state governments will look for a trade off on these in addition to bargaining for compensation for more number of years.
The meeting also comes at a time when a report by industry body Assocham and consultancy firm KPMG has pointed to sharp anomalies in the proposed GST rates and structure across different industries such as telecom, tobacco, textiles, food processing and tourism.
The exhaustive paper stated that taxation structure, say, for, tobacco industry should not be based on some emotive issues and be rational enough to check a huge amount of illicit trade, which stays outside the taxation net. Instead of subjecting tobacco and tobacco products to a higher than standard rate, the entire sector should be placed under the standard rate, with the focus of bringing exempted items under the GST net to eliminate the rampant illicit trade, it added.
As per IMF report high rates of GST / VAT lead to manipulation and fraud, the report pointed out.
"As we are in a transition period, several industry sectors are faced with challenges of adapting to new tax regime. While the GST is a path-breaking reform, its implementation should be calibrated in a manner to cause least disturbance to the existing taxation structure," said DS Rawat, Secretary General of Associated Chambers of Commerce and Industry of India (Assocham) said.
The Modi government is hopeful of a positive outcome at the meeting that commences on Thursday. "Our effort is to decide on all matters through consensus. We want everyone to come around on all issues," PTI quoted minister of state for finance Arjun Ram Meghwal as saying.