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States happy with outcome of GST Council's first meeting

Chhattisgarh Finance Minister Amar Agrawal said all states were on board for GST implementation by April 1, 2017

Left-ruled on Friday sought a decision on the formula for compensating states for any loss of revenue post the implementation of (GST) before a rate is decided even as most others hailed the decisions taken at the first Centre-State council meeting on the new tax regime.

At the first meeting of the Council, states proposed certain formulae based on their revenues for calculating compensation while the proposed compensating states if the revenue growth rate falls below 12 per cent.

"The had suggested an average of last three years of revenue, some states said it should be best of three years out of five. Then the went back and suggested that it should be based on pan-revenue growth rate of 12 per cent. Almost all states are in agreement that it has to be the best of three years out of five," Finance Minister said.

The compensation needs to be thrashed out before deciding the rate, he said.

Minister of State for Finance Rohit Patel proposed the formula of the best three of the last 10 years for calculating compensation to states while put it at the best three of the last 6 years.

Finance Minister Amar Agrawal said all states were on board for implementation by April 1, 2017.

States and the on Friday agreed to Rs 20 lakh as the turnover limit for exemption from GST, with states saying their share of revenue would be protected.

"Delhi wanted that the exemption threshold should be kept at Rs 25 lakh, but the Council decided on Rs 20 lakh. Our revenues will be protected," Delhi Deputy Chief Minister said.

Uttar Pradesh Minister of State for Skill Development Abhishek Mishra said the state is happy with the Rs 20 lakh figure and it would be hassle free for traders.

Finance Minister Captain too said there will be no loss of revenue to the state.

"We would like to be fully compensated and the has given that assurance. Now only the broad modalities are to be decided," he said.

Odisha Finance Minister Pradeep Kumar Amat said the central government will compensate for five years for revenue loss and this will be discussed in the next meeting.

According to the Finance Minister Amit Mitra, three alternatives were discussed.

A state can be compensated if the revenue under falls short of the average tax earnings in the best three years out of the past five.

Second, of the five years, two outliers are left out and an average is taken. If the revenue under is short of this, then states get compensated.

Third, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then compensation kicks in.

The base year for compensation has been agreed as 2015-16 and the average of five years will be taken, he said, adding that if for some reasons the base year becomes 2016-17, then the average would be taken for 6 years.

The Council, chaired by Union finance minister, will meet again on September 30 and discuss the compensation issue. In the October 17-19 meeting, the Council will decide on the rates.

The officials of both the and states are working on thrashing out a consensus on the compensation formula.

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Business Standard
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Business Standard

States happy with outcome of GST Council's first meeting

Chhattisgarh Finance Minister Amar Agrawal said all states were on board for GST implementation by April 1, 2017

Press Trust of India  |  New Delhi 

TM Thomas Isaac
Finance Minister of Kerala, TM Thomas Isaac

Left-ruled on Friday sought a decision on the formula for compensating states for any loss of revenue post the implementation of (GST) before a rate is decided even as most others hailed the decisions taken at the first Centre-State council meeting on the new tax regime.

At the first meeting of the Council, states proposed certain formulae based on their revenues for calculating compensation while the proposed compensating states if the revenue growth rate falls below 12 per cent.

"The had suggested an average of last three years of revenue, some states said it should be best of three years out of five. Then the went back and suggested that it should be based on pan-revenue growth rate of 12 per cent. Almost all states are in agreement that it has to be the best of three years out of five," Finance Minister said.

The compensation needs to be thrashed out before deciding the rate, he said.

Minister of State for Finance Rohit Patel proposed the formula of the best three of the last 10 years for calculating compensation to states while put it at the best three of the last 6 years.

Finance Minister Amar Agrawal said all states were on board for implementation by April 1, 2017.

States and the on Friday agreed to Rs 20 lakh as the turnover limit for exemption from GST, with states saying their share of revenue would be protected.

"Delhi wanted that the exemption threshold should be kept at Rs 25 lakh, but the Council decided on Rs 20 lakh. Our revenues will be protected," Delhi Deputy Chief Minister said.

Uttar Pradesh Minister of State for Skill Development Abhishek Mishra said the state is happy with the Rs 20 lakh figure and it would be hassle free for traders.

Finance Minister Captain too said there will be no loss of revenue to the state.

"We would like to be fully compensated and the has given that assurance. Now only the broad modalities are to be decided," he said.

Odisha Finance Minister Pradeep Kumar Amat said the central government will compensate for five years for revenue loss and this will be discussed in the next meeting.

According to the Finance Minister Amit Mitra, three alternatives were discussed.

A state can be compensated if the revenue under falls short of the average tax earnings in the best three years out of the past five.

Second, of the five years, two outliers are left out and an average is taken. If the revenue under is short of this, then states get compensated.

Third, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then compensation kicks in.

The base year for compensation has been agreed as 2015-16 and the average of five years will be taken, he said, adding that if for some reasons the base year becomes 2016-17, then the average would be taken for 6 years.

The Council, chaired by Union finance minister, will meet again on September 30 and discuss the compensation issue. In the October 17-19 meeting, the Council will decide on the rates.

The officials of both the and states are working on thrashing out a consensus on the compensation formula.

States happy with outcome of GST Council's first meeting

Chhattisgarh Finance Minister Amar Agrawal said all states were on board for GST implementation by April 1, 2017

Chhattisgarh Finance Minister Amar Agrawal said all states were on board for GST implementation by April 1, 2017
Left-ruled on Friday sought a decision on the formula for compensating states for any loss of revenue post the implementation of (GST) before a rate is decided even as most others hailed the decisions taken at the first Centre-State council meeting on the new tax regime.

At the first meeting of the Council, states proposed certain formulae based on their revenues for calculating compensation while the proposed compensating states if the revenue growth rate falls below 12 per cent.

"The had suggested an average of last three years of revenue, some states said it should be best of three years out of five. Then the went back and suggested that it should be based on pan-revenue growth rate of 12 per cent. Almost all states are in agreement that it has to be the best of three years out of five," Finance Minister said.

The compensation needs to be thrashed out before deciding the rate, he said.

Minister of State for Finance Rohit Patel proposed the formula of the best three of the last 10 years for calculating compensation to states while put it at the best three of the last 6 years.

Finance Minister Amar Agrawal said all states were on board for implementation by April 1, 2017.

States and the on Friday agreed to Rs 20 lakh as the turnover limit for exemption from GST, with states saying their share of revenue would be protected.

"Delhi wanted that the exemption threshold should be kept at Rs 25 lakh, but the Council decided on Rs 20 lakh. Our revenues will be protected," Delhi Deputy Chief Minister said.

Uttar Pradesh Minister of State for Skill Development Abhishek Mishra said the state is happy with the Rs 20 lakh figure and it would be hassle free for traders.

Finance Minister Captain too said there will be no loss of revenue to the state.

"We would like to be fully compensated and the has given that assurance. Now only the broad modalities are to be decided," he said.

Odisha Finance Minister Pradeep Kumar Amat said the central government will compensate for five years for revenue loss and this will be discussed in the next meeting.

According to the Finance Minister Amit Mitra, three alternatives were discussed.

A state can be compensated if the revenue under falls short of the average tax earnings in the best three years out of the past five.

Second, of the five years, two outliers are left out and an average is taken. If the revenue under is short of this, then states get compensated.

Third, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then compensation kicks in.

The base year for compensation has been agreed as 2015-16 and the average of five years will be taken, he said, adding that if for some reasons the base year becomes 2016-17, then the average would be taken for 6 years.

The Council, chaired by Union finance minister, will meet again on September 30 and discuss the compensation issue. In the October 17-19 meeting, the Council will decide on the rates.

The officials of both the and states are working on thrashing out a consensus on the compensation formula.
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Business Standard
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