Prime Minister Narendra Modi today reviewed preparations for roll out of the new Goods and Services Tax (GST) regime, possibly from April 1 next year, with Finance Minister Arun Jaitley and his team making a presentation on the milestones achieved and the road ahead.
Jaitley, along with Finance Secretary Ashok Lavasa and Revenue Secretary Hasmukh Adhia, made a presentation to the Prime Minister on the state of readiness for creation of a national sales tax (or GST), the biggest tax reform since the Independence.
The presentation came within days of the Union Cabinet approving setting up of all powerful GST Council, which will decide on the tax rate, exempted goods and the threshold.
Official sources said besides listing milestones achieved so far, the presentation detailed the steps to follow including the timetable to get the supporting legislations approved.
Sources said the Prime Minister wanted to understand the main areas where he should focus his mind on. Also, he wanted an update on the revenue neutral rate, IT backbone being developed and concerns of the states.
The first meeting of the GST Council, which will be headed by Finance Minister, will be held on September 22-23, and the panel is to give its recommendations on the tax rate and other provisions within 60 days.
The Prime Minister was also briefed about the widespread demand for keeping GST rate at 18-19 per cent, expectations of states from the new regime and the impact of different tax slabs on the Centre in terms of compensation it has to pay states for loss of revenue.
The government is keen to implement the new regime from April 1 so as to ensure a smooth rollover to the changed tax structure from the beginning of the new fiscal and avoid mid- year alterations.
Sources said GST implementation is running ahead of schedule so far, within more than anticipated number of states ratifying the Constitutional amendment within the 30-day timeline set by the Centre.
The focus now shifts to creating the IT infrastructure and preparing traders, businessmen and companies to smoothly shift to the new taxation regime that will subsume an array of central and state levies including central excise duty, service tax, VAT and entry tax.
Parallely, the supporting legislations -- Central GST (CGST) and Integrated GST (IGST) -- details the tax rates, exempted goods and bands, is planned to be approved in the Winter Session of Parliament in November, sources said.
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Various timelines had been decided for different aspects of implementation of GST such as recommendation of the Model GST Laws by the GST Council and its passage by the Union Parliament and State Legislatures, the development of front-end Information Technology (IT) modules on the common GST portal and the back-end IT systems, it said.
Also included in the schedule are testing and integration of GST front-end and back-end IT systems of all stakeholders, training of both Central and state tax officials and sensitisation of trade, industry and consumers.
The statement said that the government is making efforts to meet the deadlines to roll out the new indirect tax regime from the next financial year.
Listing out the progress so far, the ministry said as soon as the President's assent was received on the Constitutional Amendment Act for GST on September 8, 2016, the GST Council was created by the Cabinet within one week along with the Secretariat.
Under Article 279A of the Constitution, the GST Council has been entrusted with the power to make recommendations to the Union and states on various GST related issues, the threshold limit of turnover below which goods and services may be exempted from GST and the rates including floor rates with bands of GST.
Since notification of the GST Council on September 12, 2016, six meetings have been held.
During these meetings, number of important decisions have been taken paving way for timely rollout of GST, it said, adding the threshold limit for exemption from levy of GST has been fixed at Rs 20 lakh for normal states and Rs 10 lakh for Special Category States.
The threshold for availing the Composition scheme has been fixed at Rs 50 lakh while service providers have been kept out of the composition scheme.
To compensate states for 5 years for loss of revenue due to implementation of GST, the base year for the revenue of the state has been fixed at 2015-16 and a fixed growth rate of 14 per cent would be applied to it.
The Council has also approved the Draft GST Rules on registration, payment, return, refund and invoice, debit and credit notes.
All entities exempted from payment of indirect tax under any existing tax incentive scheme would pay tax in the GST regime and the decision to continue with any incentive scheme shall be with the concerned state or Central Government.
In case any state or Central government decides to continue any existing exemption/incentive scheme, it will be administered by way of a reimbursement mechanism.
The Council fixed bands of rates of goods under GST at 5, 12, 18 and 28 per cent. In addition, there would be a category of exempt goods.
Further, it was decided that a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the rate of 28 per cent for payment of compensation to the states.
