3-Day GST Council Meet Begins Today, Decision On Tax Rates Likely

New Delhi: The central government's efforts to implement the Goods and Services Tax or GST law from April 1 next year is about to enter a critical phase. Starting today, the three-day meeting of the GST Council will take a decision on the tax bands and iron out issues like compensation formula for the new indirect tax regime.

The government is keen to use the meet to make a deal with states so it can push the bill in the winter session of parliament, starting November 16.

The tax rate is a crucial point that will have a bearing on the common man. A senior finance ministry official said at the meet, the rate bands for essential and luxury goods is likely to be worked out.

Last year, a panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18 per cent as the standard rate for the bulk of goods and services. It had recommended 12 per cent for low rate goods and 40 per cent for items like luxury cars, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 per cent.

The meeting will also deliberate on the contentious issue of the Centre retaining power to assess 11 lakh entities who file service tax under the new tax law.

While a decision on this was taken at the first meeting of the GST Council, at least two states disagreed, claiming they were against losing the power of assessment.

The finance minister is also trying to work out a consensus on the key issues so the subsequent Central GST and Integrated GST legislations can be introduced in the Winter Session.

At its meeting last month, the state finance ministers, who are members of the GST Council, had finalised the area-based exemptions and the mechanism for treatment to 11 states, mostly in the northeast and the hilly regions.

Several alternatives were discussed regarding the formula of Central compensation to states for loss of revenue, but a decision could not be reached.

A top finance ministry source told NDTV that the government can push its agenda in the Council as the BJP and its allies rule 13 states and have the number but Finance Minister Arun Jaitley is against a vote in the council.  

Voices against the new tax regime from states, meanwhile, seem to be growing.

The All India Confederation of Commercial Taxes Associations held a demonstration at Delhi's Jantar Mantar today against what they called Centre's attempts to take away the state's powers of taxation. The association which handles the tax filing by 67 lakh entities is threatening to block the data on the tax filers and not share it with the centre if their demands are not met

Claiming the one tax system has basic faults, the national president of AICCTA, KR Suryanarayana, said the Centre is "trying to divide tax collection rights -- goods with states and services with Centre".
This, he said, will foster multiplicity. "Plus, the states will not get a single existing service tax dealer."

The association's general secretary Rajnikanth Sharia, a tax officer from BJP-ruled Rajasthan, said, "The government in the GST Council is not working to help out the states. In fact the proposals have been anti-states."

With the Centre proposing to keep its control over the service tax component and fixing the threshold for GST filing at Rs 20 lakh, the tax department employees of the states fear that reduced jurisdiction may mean reduction in jobs in states.

The association spokesperson D Gautam said, "Since 2013, without GST anywhere on the horizon, the Centre strengthened and restructured its tax cadre. At this rate, state tax employees may have no work and may lose jobs."