Three Meetings Of The GST Council And No Decision On Rates Yet

The third meeting of the GST Council ended on Wednesday, a day earlier than scheduled, without reaching a consensus on the rate structure of the new indirect tax regime. The Council ended its meeting abruptly, and is now scheduled to meet again on November 3-4, and thereafter on November 9-10, Finance Minister Arun Jaitley told reporters at the press briefing.

The Council also could not arrive at a final decision on imposing a cess or additional tax on demerit goods to fund compensation to states for tax revenue lost in the first five years of GST. The proposed cess will be levied over and above the GST on luxury items like big cars and also sin goods like tobacco and alcohol.

GST rates will also depend on the source of funds on basis of which the compensation to the losing states will be funded. On this issue we have virtually converged towards a consensus, the formal announcement of that, after working out the details will be made in the next meeting itself.

Arun Jaitley, Finance Minister

The GST rate structure would be decided only after the source of funds for compensation has been finalised, the finance minister added.

“The funding mechanism for compensating states, whether it should be by way of higher tax or through a cess, will have to be discussed and decided,” Adhia said after the finance minister’s press briefing.

On Tuesday, the Council deliberated over levying a cess on demerit goods over and above the highest proposed GST slab rate of 26 percent and use the revenue collected from this cess to compensate states. Revenue Secretary Hasmukh Adhia had told reporters on Tuesday that the Council is considering 12 percent and 18 percent for the standard GST rate, a low rate of 6 percent and a high rate of 26 percent.

The central government estimates it will receive Rs 44,000 crore from the proposed cesses on demerit goods and will need an additional Rs 7,000 crore to compensate states, according to Kerala Finance Minister Thomas Issac.

On the issue of dual control and division of authority between the Centre and states, Jaitley said that as per the Council’s decision an assessee will be assessed only by one authority – either the state or the Centre.

The data on traders and dealers below the turnover limit of Rs 1.5 crore, presented in Wednesday’s meeting was different from what was presented earlier, said K Pandia Rajan, Tamil Nadu representative to GST Council.

The central government is expected to earn more revenue than the states if it is given exclusive control to assess businesses over Rs 1.5 crore, and therefore the Council decided to reconsider the dual control threshold in the meeting to be held on November 3, the Kerala finance minister added.



On the issue of dual control and division of authority between the Centre and states, Jaitley said that as per the Council’s decision an assessee will be assessed only by one authority – either the state or the Centre.

The data on traders and dealers below the turnover limit of Rs 1.5 crore, presented in Wednesday’s meeting was different from what was presented earlier, said K Pandia Rajan, Tamil Nadu representative to GST Council.

The central government is expected to earn more revenue than the states if it is given exclusive control to assess businesses over Rs 1.5 crore, and therefore the Council decided to reconsider the dual control threshold in the meeting to be held on November 3, the Kerala finance minister added.

At its November 3-4 meeting, the GST Council will take up the issue of usage of cess funds and the GST rate. Once members decide the rate structure, the dual control mechanism, and source of compensation to states, the November 9-10 meeting would hopefully take up the Draft Model GST Law, the finance minister added at the briefing.