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Key step cleared, July rollout likely for GST, says Arun Jaitley

The Goods and Services Tax (GST) Council in its eleventh meeting on Saturday gave in-principle approval to the two key draft laws of Central GST (CGST) and Integrated GST (IGST). Final approval to these laws, along with the other two pending laws of State GST (SGST) and Union Territory (UTGST) are likely by March 16. The government is expected to introduce the Bills, along with the compensation Bill that had been approved earlier, for clearance in the second half of Parliament’s Budget session.The GST Council also expanded the coverage of composition scheme to restaurants with annual turnover up to Rs 50 lakh at the taxation rate of 5 per cent, apart from the earlier approved categories of traders and manufacturers.

“There were demands that restaurants should be included in composition scheme, particularly those with less turnover. So the Council decided that there would be a composition scheme for restaurants up to a turnover of Rs 50 lakh and the rate for them will be 5 per cent. Remaining restaurants will come in the regular service tax rate,” Revenue Secretary Hasmukh Adhia said.

The GST Council in its first meeting in September 2016 had approved a compounding scheme with a flat 1 per cent tax rate for traders, and 2 per cent for manufacturers, with gross turnover cut-off of Rs 50 lakh. The scheme provides for an easier method of calculating tax liability, and allows the option of GST registration for dealers with turnover below the compounding cut-off to reduce the administration cost associated with collection of tax from small traders

Briefing reporters after the meeting, Finance Minister Arun Jaitley said, “In a nutshell, compensation law was approved in last meeting, today we have approved the CGST and IGST law and in next meeting we will be approving the SGST and UTGST law which will then complete the legislative exercise and enable us to take these before Parliament.”

Jaitley said some changes have to be made in the language of the laws, after which they will be shared with states next week, ahead of the Cabinet taking up the four draft laws for approval. State finance ministers said the draft laws would come for formal approval in the next meeting on March 16.

Jammu & Kashmir Finance Minister Haseeb Drabu said “some minor editorial changes” were required in the draft laws. “They will come back for formal approval in the next GST meeting,” Drabu said.

West Bengal Finance Minister Amit Mitra said the Centre had accepted as many as 26 changes sought by the states. “This shows the federalist character of India,” Mitra said. “CGST and IGST laws will come up for further discussion at the next meeting of the Council in mid-March.”

Jaitley expressed optimism about being able to meet the intended July 1 deadline for rollout of the indirect tax regime. “As it looks like, it looks on track. Hopefully the laws would be before Parliament this session and subject to Parliament approving them, July 1 this year now optimistically looks like the possible date for GST implementation,” he said.

Drabu, however, said September 1 might be a more feasible deadline to implement GST, even though he has not proposed this formally to the GST Council.

On the enabling provision for the highest rate to be capped at 40 per cent, Adhia said the rate would be applied only when the cess is merged with GST five years after implementation.

“The rates will be what has been decided by the Council. There won’t be a higher rate of taxation. But the cap rate in the legislation is always put at a higher level to leave headspace, just as in the Customs Act you have a difference between the bound rate and applied rate. So the applied rate is going to be what the Council has decided,” Jaitley said.

In the next meeting, the Council will discuss the draft SGST and UTGST laws. For union territories that do not have their own legislatures, the Centre will need to get the UTGST law approved by Parliament, while those that do — like Delhi and Puducherry — will have to pass the bills in their respective assemblies.

The Council will also discuss the setting up of a quasi-judicial body for the anti-profiteering provision in the model GST law to ensure that the reduction of tax incidence is passed on to consumers.

Following legislative approval, the Council will meet to decide the fitment of the various goods and services into the multi-slab tax structure of GST. The Council had earlier agreed upon a tax rate structure of 5, 12, 18 and 28 per cent along with cess over and above the highest rate for demerit and sin goods. The enabling provision for the rate of cess has been included in the compensation law, the highest rate being 12 per cent, officials from states said.

Though some state finance ministers said that the fitment exercise may turn out to be a lengthy affair, the Union finance minister brushed away these concerns.

“When the rates were decided, that initially the nearest possible slab where you would be fitted into. So the exercise is substantially arithmetical except in certain products where the Council will decide to grade it accordingly,” Jaitley said.

Source: http://indianexpress. com/article/business/economy/key-step-cleared-july-rollout-likely-for-gst-says-arun-jaitley-4554917/

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