GST Council likely to finalise tax rates shortly

The GST Council, which began 2-day deliberations here today, is likely to shortly finalise a 4-tier tax structure with some tinkering of the Centre's proposal.
The Centre has proposed 4-tier tax structure of 6, 12, 18 and 26 per cent, the peak rate being for FMCG and consumer durables.
According to sources, the Council comprising state finance ministers and headed by Union Finance Minister Arun Jaitley may opt for a lower rate of 5 per cent instead of the proposed 6 per cent.
The members may agree to raise the higher slab to 28 per cent rate from the proposed 26 per cent.

They may retain the 12 per cent and 18 per cent rate for certain categories under the Goods and Services Tax regime.
Sources also said that certain states are in favour of 40 per cent tax rate on tobacco.

The meeting will have to sort out the issues concerning tax rate to enable Parliament to approve the Central GST (CGST) and Integrated GST (IGST) legislations in the Winter Session beginning November 16 and pave the way for rollout of the new indirect tax regime from April 1 next year.
A state finance minister said "mood in the meeting is very good" and the Council is expected to seal the rate structure by evening.

On the issue of dual control or cross empowerment, another state minister said that there would be a generic line in the CGST Bill regarding jurisdiction of centre and states on taxes. The final touches would be given by GST Council.
As per the slab proposed the Centre, the items which are currently taxed between 3-9 per cent would fall in the 6 per cent bracket; those in 9-15 per cent range would come under 12 per cent rate.
West Bengal Finance Minister Amit Mitra said, "We are
sticking to our position that you cannot have duel control, it has to be single control of states below Rs 1.5 crore in the benefit of the poor. We will not bend it".

The second issue, he said, relates to laws that will be formulated.
"On that there was feeling that whatever is put on table will be accepted by the states. Fact is across the political parties have come prepared to discuss and debate the matter ... That has not been completed," Mitra said.
Elaborating on the Council's deliberations, Jaitley said there are three proposals.
"One is you do horizontal division, second is vertical division, third is you work out a hybrid model. The underlying meaning behind that cross empowerment takes place but the existing two bureaucracies are separate. We still haven't reached a stage where we are converging to a federal bureaucracy which will manage the GST," the Union minister said.

"So these two separate bureaucracies that we have is also a human resource in taxation matters so how do we optimally use this human resource. I would like all issues to be resolved," he said.
Jaitley said that there cannot be implementation without resolving all issues.
"My approach will be to resolve it by discussion or consensus. So far I have avoided division and I would like to avoid division to the extent it is possible," Jaitley said.
Delhi Deputy Chief Minister Manish Sisodia also expressed concern on dual control saying the issue was not getting due attention from the Centre.

The GST Council will again consider the draft
compensation law if the quantum of compensation goes up to Rs 90,000 crore from the current estimates of Rs 55,000 crore, Mitra said.
"If you assume 30 per cent decline in tax collection, instead of five states demanding compensation, 10-12 states will need compensation. And therefore the amount of compensation required where will it come from?" he said.
Kerala Finance Minister Thomas Isaac too said the revenue loss is going to be much higher than Rs 55,000 crore.
"Earlier the Council had decided on four commodities for levying cess. Now it has been decided that it would be as notified by Council and at the end of year five it would be merged with the GST rate or divided between Centre and states as the Council decides," Isaac said.

He further said that Kerala continue to demand that dealer and service providers with turnover below Rs 1.5 crore should be taxed only by the states. The state also demanded that IGST collections should be shared between Centre and states.
As many as six sectors, including banking and insurance, IT and telecom, and civil aviation, today made presentations before the GST Council and pressed for single registration either with Centre or states under the GST regime.
Sisodia said that while central government PSUs, infrastructure and service departments wanted centralised registration, state government PSUs and Public Works Department wanted that control remain with states.

Rajasthan Industries Minister Rajpal Singh Shekhawat said he was hopeful that discussion on IGST law would complete tomorrow.