States on board, GST set for July roll-out

Council clears Central and Integrated Bills that are likely to be introduced in Parliament in the second half of the Budget session

The Goods and Services Tax (GST) Council on Saturday approved two crucial Bills — the Central GST and the Integrated GST. The Union Territory GST (UTGST) Bill, however, is yet to be approved.

It is now almost certain that the Bills will be introduced in Parliament in the second half of the Budget session, starting March 9, to ensure that the GST can be rolled out from July 1.

“We approved the CGST and the IGST Bills. The decision was unanimous and all the states supported it. It looks like July 1 could be a possible date for implementing the GST,” said Union Finance Minister Arun Jaitley, after coming out of the 11th meeting of the Council. He also serves as the chairman of the GST Council, which was supposed to meet for two days, but now the Sunday session has been cancelled.

West Bengal Finance Minister Amit Mitra and his Jammu and Kashmir counterpart Haseeb Drabu said the Council would take a final look at the CGST and the IGST Bills at the next meeting on March 16.

The Council would also take up the State GST Bill, along with the UTGST Bill, in the next meeting. On Saturday, it also approved the division of administrative turf between the Centre and the states for IGST.

The legal committee of the Council will finalise the SGCT Bill and circulate it among the states within three days. These Bills need to be cleared by the respective state legislatures.

West Bengal Finance Minister Amit Mitra said, “The Centre has approved all 26 proposals of the states during the 10-day meeting between the officers of both sides. The federalist structure got a boost. Cross-empowerment under the IGST has been approved.”

The Council also approved an enabling provision for a higher tax ceiling of 20 per cent under the CGST Bill against 14 per cent prescribed earlier. A similar provision will also be made in the SGST Bill to enable the Council to hike the peak rate to 40 per cent in aggregate for GST in the future, against 28 per cent prescribed now.

For now the four tax slabs will remain the same at 5, 12, 18 and 28 per cent. The fitment of itemwise GST rates will be worked out after March 15 by a committee of officers. It will also decide a cess on luxury and demerit items such as luxury cars, aerated drinks, and tobacco to compensate states for any loss of revenue from implementation of GST in the first five years.

“The 40 per cent cap does find mention in the Bills approved. This is just the ceiling rate and is to subsume cesses going forward and not for any increase in peak GST rate of 28 per cent. The action of the Council after the March 16 meeting will shift to rate fitment of goods and services in four brackets,” said Harishanker Subramaniam, national leader, indirect tax, EY India.

The Council also decided that there will be a 5 per cent composite rate for restaurants with a turnover of ~50 lakh, which is 2.5 per cent each for CGST and SGST. For traders, the composite rate will be 0.5 per cent each under CGST and SGST.

In the last meeting held in Udaipur, the Council had cleared the draft compensation law, which guarantees states a full compensation of five years for any revenue losses under the GST. “While some legal drafting is still left, the government looks set to get these passed in the second half of the Budget session… I don’t see any roadblock in the GST becoming a reality from July 1,” said Pratik Jain, indirect tax leader, PwC-India.

Abhishek Rastogi of the law firm Khaitan & Company said his discussions with government officials suggest there was a strong willingness to roll out the new tax regime from July 1.

On the anti-profiteering issue, a senior government official said the government might make a new department or ask the existing department to monitor profiteering. “However, we do not plan to send inspectors to control profiteering. If there is a reduction in tax rates, then traders should pass it on to consumers. The Council has the authority to create a body later to take care of the profiteering concerns,” he said.