GST Council Divided over Tax Rate on Day 1

By | September 23, 2016
There was no consensus on the key issues of tax rate and threshold for taxation on the day one of the first meeting of the Goods and Services Tax Council, which drew up a draft timetable for finalising of crucial issues including tax legislations and framework for its functioning.
The meeting will continue on Friday. The government hopes to roll out goods and services tax (GST) from April 1, 2017.
“Meeting has gone on in true federal spirit … I am more optimistic about the functioning of the GST Council … We have finalised the rules for functioning of the council …A draft timetable was given and that has been adopted,“ Union finance minister Arun Jaitley said after the nearly four-hour-long meeting on the first day Thursday.
With many open-ended issues, the council will have a series of meetings at shorter frequencies after Friday. The council is chaired by Jaitley and has state finance ministers as members. The Centre has one-third vote in the council while states have one vote each, making the remaining two-thirds. All decisions will need to be made with a three-fourth majority.
It is the apex decision-making body for all aspects of GST that seeks to replace multiple state and central taxes with a single levy.
The Centre is keen to roll out the new tax regime from April 1, 2017 but some states including Tamil Nadu want the timeline of implementation be pushed to September 1, 2017. States such as Kerala have cautioned against stiff timelines for implementation.
NO MEETING OF MINDS ON THRESHOLD
The divide between the small and the large states continued with smaller ones demanding that the threshold for tax be kept at Rs. 10 lakh and not Rs. 25 lakh as proposed by larger states. Though, there seems to some acceptance of having a differential tax threshold system, especially in view of concerns expressed by the Northeastern states, the matter has now been handed over to the technical committee of central and state government officials. “We have converged to two viewpoints. We will continue the meeting on Friday on this issue … Officials will also discuss this separately,“ Jaitley said.
He said small states want Rs. 10 lakh and some want Rs. 25 lakh. “We will try to reconcile.“
On the composition scheme -arrangement wherein the assesse pays tax as a percentage of revenue -there is consensus that it be allowed for entities with up to Rs. 50 lakh of turnover.
The composition scheme will allow smaller taxpayers to pay tax at a lower fixed rate without input credit but sans any audit and reduced paperwork. However, some states want the composition scheme to be restricted only to traders and not be opened to manufacturers to prevent its abuse.
GST COMPENSATION
Issues of compensation and cross empowerment to enable single interface of tax payer with a tax authority will be taken up at Friday’s meeting. A discussion on the new GST compensation law is also on the cards. Some states suggested that the compensation be worked on the basis of average of highest turnover of three years in a five year period is acceptable to the Centre.
Cross empowerment is yet to find favour with most states demanding that the Centre completely give up administration of taxpayers with turnover below Rs. 1.5 crore and jointly administer those above it. – www.economictimes.indiatimes.com [23-09-2016]

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