After President's assent, formation of GST Council is the next big step

After the President gave his assent to the Goods and Services Tax (GST) Bill on Friday, making it an Act, the next big step is formation of GST Council, which would have the Union finance minister and state finance ministers as members. GST Council would decide on the GST rate, exemptions and thresholds and also finalise the law.

"The next crucial milestone is the constitution of GST Council and getting the requisite majority at GST council (which requires concurrence of at least 20 states and union territories out of 31 as against 16 for Constitutional Amendment)," says Suresh Surana, Founder, RSM Astute Consulting Group.

Any resolution in the GST Council would be passed only after 75 per cent of the members present agree. The Centre has a one-third weightage in the vote while the state governments together will have two-thirds weightage.

The GST Council would be a powerful body given it would decide the GST rates and draft rules for Central, state and Integrated GST.

Arriving at a consensus on GST rate itself is going to be a tough task ahead given that states have already rejected the standard rate of 18 per cent suggested by the GST Committee headed by Economic Advisor Arvind Subramanian.

Drafting of GST rules by the Council would also take time given the number of flaws experts have pointed out in the Model GST law. The other important decision that the GST Council would have to take is deciding the list of exempted goods.

In the present indirect tax regime, there are around 300 items that are exempted from central excise duty and around 90 items exempted from value-added tax (VAT). Now, the government will have to merge all the exempted items and decide on a final list of exempted goods.