GST Council gets cracking on GST deadline

By | September 24, 2016

Council gets cracking on GST deadline

The GST Council on Friday took two big steps towards meeting the April 1 deadline for introduction of the goods and services tax (GST) system. On the concluding day of its two- day meeting, the council agreed on exemption thresholds and dual control over assessees. The council also decided to subsume all cesses in the GST and discussed ways of compensating states. The states and the Centre agreed to keep entities with Rs. 20 lakh annual turnover out of the GST, barring 11 northeastern and hill states, where the threshold will be Rs. 10 lakh. While the next meeting of the council on September 30 will decide on the draft rules and area- based exemptions, the crucial GST rate and tax slabs will be decided at a three- day meeting beginning October 17. The Rs. 20 lakh cut- off was arrived at after a debate on Thursday, in which states like Uttar Pradesh sought a Rs. 10 lakh threshold, while others such as Delhi sought Rs. 25 lakh. An agreement was also reached on the prickly issue of dual control, where the Centre agreed to grant states exclusive administrative control of assessees with annual turnover of up to Rs. 1.5 crore in goods, while retaining exclusive control throughout in services. “All decisions today by the GST Council were taken on the basis of consensus,” said Finance Minister Arun Jaitley, who chairs the council. Central and state officials will have powers to assess entities with annual turnover above Rs. 1.5 crore, in the case of goods. A ‘ cross- empowerment’ model is being discussed to ensure a taxpayer with an annual turnover above Rs. 1.5 crore deals with only one authority for all taxes. Jaitley said there would be cross- examination either by officers from the Centre or state to avoid dual control. “ Which assessee is assessed by who will be decided on the basis of the risk assessment by the Centre and state. Whichever of the two authorities has a higher risk assessment will assess it,” Jaitley said. Only five per cent of the cases would be audited under the GST regime, against 70- 80 per cent by some states now, he said. The Centre will train state officers to deal with service tax cases to allow them to administer assessees with annual turnover up to Rs. 1.5 crore at some point in the future. Alternatives were discussed for compensating states for any loss of revenue in the new tax regime. A state can be compensated if its revenue under GST falls short of the average tax earnings in the best three years out of the previous five. Secondly, of the five years, two outliers are left out and the average is taken. Thirdly, a base year can be set and a particular growth rate for tax revenue can be decided for all states. The states have also agreed to keep 2015- 16 as base year to compute the tax base and make revenue calculations to arrive at a compensation formula. “ The methodology and formula for payment will be worked out in the next meetings,” Jaitley said. The council also resolved that all cesses will be subsumed in the GST. “ All items, including cess, will be included in the GST,” Jaitley said, adding the council was working on a draft compensation formula that could be adopted at the next meeting of the council on September 30. The compounding tax threshold for traders has been set at Rs. 50 lakh. Those with an annual turnover between Rs. 20 lakh and Rs. 50 lakh will have the option of paying a tax rate of one to two per cent instead of the full GST rate. –[24-09-2016]

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