Centre to get higher share in residual compensation fund

Bi-monthly compensation for states against quarterly payout proposed earlier

GST BILLS IN LOK SABHA

HIGHER SHARE for the Centre in unutilised funds of compensation fund, bi-monthly payment of compensation to states, reduction in threshold for tax collected at source, exemption to agriculturist supplying produce out of cultivation from registration and refund to tourists leaving the country are some of the new features in the four Bills for Goods and Services Tax (GST) introduced in the Lok Sabha on Monday. Some provisions of the draft model GST law, which was unveiled last year, such as an antiprofiteering authority, arrest powers for tax evasion and selfassessment found their place in the final version of the GST Bills.

Asperthegst(compensation tostates)bill,thegovernmenthas proposed a non-lapsable fund called GST Compensation Fund for compensating states for revenue losses during the transition period of five years after the rollout of the indirect tax regime. A bi-monthlycompensationpayout will be made to states as against a quarterlypayoutproposedearlier in the draft version of the GST law. Centre has also decided to retain a higher share from the residual amount of the compensation fund, with 50 per cent of the unutilised funds proposed to be transferred to the Consolidated Fundofindiaasthecentre’sshare. The remaining 50 per cent will be shared between states and Union territories in the ratio of their total revenues from SGST in the last year of the transition period.

As per the earlier draft, any excess amount after the end of the five year tenure in the GST Compensation Fund were to be divided between Centre and states as per the specified formula under which 50 per cent of the excess amount was to be devolved between Centre and states as per statute.

The Central Goods and Services Tax Bill has reduced the threshold for levy of 1 per cent tax collected at source to Rs 2.5 lakh as opposed to Rs 5 lakh in the draft version of the law. “The government may mandate a department or establishment of the central government or state government; or local authority; or governmental agencies; or such persons or category of persons as may be notified by the government on the recommendations of the council, to deduct tax at the rate of 1 per cent from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees…” the Bill stated.

For registration, the CGST Bill stated that persons exempt from paying tax and agriculturists, to the extent of supply of produce outofcultivationofland,shallnot be liable for GST registration. The earlier definition had exempted agriculturists, for the purpose of agriculture from registration.

The Integrated GST Bill has a new clause providing for refund tax paid on supply of goods to tourist leaving India. Also, the Bill provides for payment of tax by a supplier of online information and database access or retrieval services.

The Compensation Bill also provides for audit of accounts relating to Compensation Fund by CAG along with proposing final adjustment of compensation for states to be done after audit of accounts by the CAG. The GST Council had decided to set up a compensation fund by levying cessondemeritandluxurygoods.

The Bill also stipulates that the base year for calculating the revenue of a state would be 2015-16 and a growth rate of 14 per cent would be used for calculating the revenue of each state in the first five years of implementation of GST. In case of 11 special category states, the revenue foregone on account of exemption of taxes granted by states shall be counted towards the definition of revenue for the base year 2015-16. The revenues of states that were not credited to the Consolidated Fund of the states but were directly devolved to “mandi” or “municipalities” would also be included in the definition of ‘revenue subsumed’, the Bill said. SCRIPTING ITS second biggest single-day gain this year, the rupee on Monday zoomed by 37 paise to close at a fresh 17month high of 65.04 on the back of panic dollar selling by speculative traders and exporters.

This is the highest closing for the domestic unit since October 28, 2015 when it had closed at 64.93. Expectations of more reforms that will boost long-term economic growth reinforced investor optimism including the muchawaitedlabour,agricultural and banking reforms. Robust capital inflows and weakness of the dollar against other currencies overseas predominantly boosted the rupee value against the dollar, a forex dealer said.

Foreign investors have pumped in about $6 billion in capital markets so far this month, buoyed by expectations that BJP’S victory in Assembly polls is a precursor to more “bold, reformist policies” in India.

Heightened volatility in greenback characterised foreign exchange market sentiment following the failed passage of the US healthcare reform through the US Congress last weekend.

However, worries of policy gridlock and the possible knockon effects of that sent global financial markets into a tailspin which expect a radical progrowth agenda.

Domestic equities couldn’t find the magic and endured a massive sell-off on the back of profit-taking across the spectrum as investors preferred to remain cautious ahead of F&O expiry amid lack of support from global peers. The home currency resumed on a firm footing at 65.27 from last Friday’s closing value of 65.41 at the Interbank Foreign Exchange (Forex) market.

Maintaining its buoyant momentum, the local unit hit an intra-day high of 65.01 in late afternoon deals before ending at 65.04, showing a massive spike of 37 paise, or 0.57 per cent.