Posted On December 4, 2016 By In Business And 967 Views

GST council: Stalemate continues, next meet on December 11-12

The fifth session of the Goods and Services Tax (GST) Council, on Saturday, made some progress in fine-tuning the draft model law, based on which the Central GST (CGST) and state GST Bills will have to be approved by Parliament and state assemblies, respectively. However, no resolution was in sight on the issue of how the Centre and states will share their administrative powers on the 10-million indirect tax assessee base. With the Council’s next meeting slated for December 11-12, the Centre will require to race against time to ensure passage of the three bills for CGST, integrated GST and states’ compensation bills in the current Parliament session, and roll out the new tax from April 1, 2017. The GST’s launch can’t anyway be delayed beyond September 16 next year, as the recent Constitutional amendment renders the extant taxes — which are to be subsumed in GST — non-enforceable from that date. Finance minister Arun Jaitley said discussion on the “cross-empowerment” issue — the IGST daft is also integrally linked to this — was “continuing”. “Logjams are meant to be broken,” he said. Stating that the Council had a “long and good” discussion on the division of administrative powers, he added: “If you ask me if we are close to a resolution, well, I can’t answer that… I’m keeping my fingers crossed.” Asked whether the GST Council would put the issue to vote, Jaitley said his approach as chairman of the Council has been to arrive at a consensus through deliberative democracy and “avoid division to the extent possible”. Kerala finance minister Thomas Isaac said: “We were not able to arrive at a consensus regarding the cross-empowerment model. Therefore, the discussion on GST laws could not be completed. The compensation law was not taken up, but a formula has arrived and we will discuss it.” The sticking point is how the relatively small taxpayers — who, under existing regime, are largely with states — will be administered. The states want exclusive control on businesses with turnover below Rs 1.5 crore (the current threshold for central excise), including the service taxpayers, who are close to 30 lakh in number. Sources said the Centre is inclined to give the states exclusive right to assess goods suppliers up to Rs 1.5 crore, but is firm that the service tax assessees should remain under its sole control at least in the initial years. The states, according to the Centre, require to have the competence to deal with service tax, which the Centre has acquired over the last 22 years. The states’ concerns are over optimal use of their bureaucracy, rather than revenue-related. The GST revenues are to be shared between the Centre and states, with a slightly higher share for the latter. The states are also assured of full compensation for any revenue loss in the initial five years after the new tax kicks in. It was decided earlier that in order to compute the states’ revenues losses from GST, a 14 per cent annual growth over their 2015-16 revenue base (from relevant taxes) would be assumed. Although the states are worried about revenue losses due to demonetisation, it is not relevant to the GST compensation talks as 2015-16 was adopted as the base year. While industry in general is worried about an enabling non-profiteering clause in the model GST law and e-commerce firms fret about the retention of the tax collected at source obligation on them, the Council was inclined to endorse both, sources said. The anti-profiteering provision — which could be implemented only with the setting up of a designated authority — compels businesses to pass on the benefits from any reduction in output tax and rise in input tax credit as a result of GST roll-out. Analysts are also concerned about the likely compliance burden on large players in services sector in the GST regime. Even though the GST principle that tax will be paid where the consumption takes place is welcome, more clarity is required on the place of supply rules, they feel. Pratik Jain, partner and leader, indirect tax, PwC, said: “The industry would be disappointed that the GST Council meeting could not achieve the desired outcome. However, substantial progress seems to have been made in terms of discussions on draft laws and FM mentioned that there was a general consensus on as many as nine chapters of the GST draft.”


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