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GST Council meeting begins today; 5 issues that will set the agenda

GST Council meeting begins today; 5 issues that will set the agenda

In its previous meeting that was held last month, the GST Council had finalised on the area-based exemptions and outlined how 11 states will be treated under the GST regime.

The critical three-day GST Council meeting will begin on Tuesday, which will oversee discussions on the tax rate and address issues on compensation for the new indirect tax.

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In its previous meeting that was held last month, the GST Council had finalised on the area-based exemptions and outlined how 11 states will be treated under the GST regime.

Here are 5 issues that GST Council will deliberate during the 3-day meeting:

1. GST Tax Rate

A report in Business Standard stated that Centre may propose to implement a four-tier tax structure with an upper slab of 26 per cent. The proposal, if accepted, will lead to almost 20-25 per cent of all taxable goods falling under the peak rate slab.

The discussion paper to be presented in the meeting is expected to have proposed a standard rate of 18 per cent while the states have been pushing for a standard 22 per cent rate.


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2. Compensation to States

The Centre has proposed many compensation strategies to states in its previous meetings. According to the proposals, a state can get compensated if:

a. The states will get compensated if the revenues earned under the GST falls short of the average proceeds during states' best three years out of five years.

b. Leaving out two outlying years and taking an average of the remaining three years, if the revenue from GST is still falling short, the state gets compensated.

Other proposals for compensation were:

a. Fixing a base year and growth rate for the states and monitoring whether the revenue from the GST falls short.

b. Fix a rate of revenue growth and allocate the required compensation.

However, in the area of compensation the Council has never been able to gather consensus.

Since the Centre is determined to provide full compensation for the first five years of the GST, a decision on compensation will be arrived in this meet.








3. Deadlines

With the government fixing a deadline of April 1, 2017 for the rollout of the GST and The Finance Ministry is keen to resolve all issues in the three-day meet to ensure that the Central GST (CGST) and Integrated GST (IGST) legislations can be introduced during the Winter Session of Parliament to begin on November 16.

The Finance Ministry has set the date to present the consensus regarding all issues of the GST Council as November 22.

4. Service Tax Assessment

Another important issue that will be discussed in the three-day meet is whether Centre will retain power to assess 11 lakh service tax filers under the new dispensation.

In the previous meet, the Centre and the states had differences regarding the control of the service tax assessees.

The GST Council, which is headed by Finance Minister Arun Jaitley, had decided to allow states to have administrative control over Value Added Tax (VAT) assessees with annual turnover of less than Rs 1.5 crore.

For a turnover of over Rs 1.5 crore, a system of cross empowerment between states and Centre was agreed by the Council.

However, the Finance Minister had decided that the state government officials needed to be trained before they take over the assessment and until then, the Centre will have exclusive jurisdictional control.