New Delhi: The Union cabinet on Monday gave its nod to the creation of the goods and services tax (GST) council, the main decision-making body that will finalize the design of GST.
The finance ministry has notified it, setting in process the penultimate leg of rolling out GST.
The GST council will be a representative body that will have the Union finance minister as chairman and state finance ministers as members. Its first meeting will be held on 22 and 23 September in New Delhi.
It has the difficult task of finalizing the design of GST by resolving some contentious issues between the centre and the states.
It will have to decide on tax rates under GST that protect the revenue of the states and the centre, but at the same time do not hurt the common man. It also has to address the issue of dual control of small traders by dividing the administrative powers between the centre and the states in such a manner that every small trader is subject to the scrutiny of a single tax authority.
The council will also give a nod to the final revenue threshold limit below which traders will be exempted from GST.
In the GST council, a decision can be taken by a three-fourth majority with the centre having a one-third vote and the states the remaining two-third.
An early decision on these issues will be crucial for the government to table the draft GST laws—the central GST law and the integrated GST law—in Parliament in the winter session that starts in November.
The government is aiming to implement GST from 1 April 2017, but has admitted that it may be an uphill task.
Last week, finance minister Arun Jaitley called it a very stiff target. “We are running against time. But I would certainly like to give it a try,” he said.
However, speaking at a press conference after the cabinet meeting, revenue secretary Hasmukh Adhia said the government is geared up to meet the 1 April implementation deadline.
“So far, we are ahead of the time schedule. As per our internal deadline, we are looking at a two-month time frame from the date GST council first meets for the council to arrive at a decision on issues like the rate structure, exemptions, thresholds, place of supply rules, floor rates and then finalize the GST laws,” he said.
Adhia added that the GST council will decide if the rates should be a part of the central GST and state GST bills or not.
Adhia wrote to all state chief secretaries on Monday to nominate the minister who will represent the state in the council.
GST aims to economically unify the country. A destination-based tax, GST will subsume most of the indirect taxes levied by the centre and the states like excise duty, service tax, value added tax, entertainment tax and luxury tax.
The cabinet approved the creation of the GST secretariat in New Delhi and appointing the revenue secretary as secretary of the GST council and the chairperson of the central board of excise and customs as a permanent invitee to the council. All expenses of the council will be borne by the central government.
Rajeev Dimri, leader, indirect tax, BMR & Associates LLP, said the GST council has a busy agenda.
“The most important of them being reaching consensus amongst all states regarding several aspects of levy and administration of GST in India like tax rates, list of goods to be exempt/taxable on merit rates of GST, determining threshold for taxable turnover for goods and services, and so on. Eyes would also be set on how GST council would resolve key pending items such as common adjudication and assessment by centre and states, fate of existing tax incentives to the industry and deliberation of various industry representations for model GST law,” he said in a note.