GST Council to discuss tax rates, dual control tomorrow

With barely a fortnight left for Parliament's Winter Session, the GST Council will begin its crucial 2-day meeting on Thursday to decide on tax rate including the levy of cess and sort out the vexed issue of jurisdiction over assessees.

At the meeting, to be chaired by Finance Minister Arun Jaitley, the Centre is likely to press its proposal for 4-tier tax structure of 8, 12, 18 and 26%, the peak rate being for FMCG and consumer durables.

Meanwhile, Minister of State for Finance Arjun Ram Meghwal told PTI that there had been "minor" differences over the issue of cess but expressed confidence that it will be resolved.

He said, "Our effort is to decide on all matters through consensus. We want everyone to come around on all issues... There may be times when Tamil Nadu or Kerala or West Bengal or Uttar Pradesh have said something different but we will get them around.

"We are confident that the GST will be rollout from April 1, 2017...All issues would be sorted out before that."

The Centre has also proposed to levy additional cess on demerit goods like tobacco, aerated drinks and polluting items to create a Rs 50,000 crore fund to compensate the states for revenue loss.

The proposal, which was discussed at the last meeting, could not be adopted by the Council because of opposition by some states.

The meeting beginning tomorrow will have to sort out the issues concerning tax rate to enable Parliament to approve the Central GST (CGST) and Integrated GST (IGST) legislations in the winter session beginning November 16 and pave way for roll out of the new tax regime from April next year.

Some central officials say it is "unfortunate" that states are opposing the cess despite assurances for compensating revenue loss for initial five years.
 

At the last meeting, the Council agreed on keeping base year for calculating the revenue of a state at 2015-16, and considering a secular growth rate of 14% for calculating the likely revenue of each state in the first five years of implementation of GST.

States getting lower revenue than this would be compensated by the Centre.

As some states preferred a higher tax slab over cess, Jaitley contented that the cost of funding compensation through an additional tax would be "exorbitantly high and almost unbearable".

Differences arose between the Centre and states at the last meeting on dual control, with states demanding control over 11 lakh service tax assessees and the Centre proposing to do away states having exclusive control over all dealers up to an annual revenue threshold of Rs 1.5 crore — an issue which was settled in the first meeting of the GST Council.

West Bengal Finance Minister Amit Mitra has said that the Centre has withheld information relating to the number of service tax assessees. He said while the Centre has disclosed 11 lakh tax payer, the actual number of service tax assessees is estimated at 30.5 lakh.

The Centre is expected to have a tough task of building consensus with states on these vexed issues. The GST Council, chaired by Union Finance Minister, has representatives from all the states.

Under the proposed 4-slab structure, the items which are currently taxed between 3-9% will fall in the 6% bracket; those in 9-15% range will come under 12% rate.

Those products which are currently taxed between 15-21% will attract 18% levy while those above 21% will be taxed at the peak rate of 26%.