GST Bill: The day after, government hints at rate higher than 18 per centhttps://indianexpress.com/article/business/economy/arun-jaitley-gst-bill-passed-goods-and-service-tax-rate-rajya-sabha-2954564/

GST Bill: The day after, government hints at rate higher than 18 per cent

On bringing next Bills as money Bills, Jaitley says my hands tied by Art 110

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Arun Jaitley in New Delhi on Thursday. (Express Photo: Tashi Tobgyal)

Even as a final call on the Goods and Service Tax rate will be left to the proposed GST Council, the Centre Thursday clearly indicated that the standard rate is set to be higher than the maximum rate of 18 per cent sought by the Congress party.

To the Congress party’s other demand of the government introducing the two upcoming central GST Bills as financial bills, rather than money bills — and thereby bypassing a debate — Finance Minister Arun Jaitley said: “The Constitutional provision in Article 110 and 117 as to what is a money bill and what is a finance bill is absolutely clear. The word used in Article 110 is ‘shall be,’ that is what shall deemed to be a money bill, so I can’t convert a constitutional requirement into my own option. That’s the option that I don’t have.”

While a financial bill has to be debated and voted in both Houses of Parliament, a money bill is debated and voted only in Lok Sabha. Rajya Sabha can only suggest amendments to a money bill, but it is up to the Lok Sabha to accept them or reject them.

Jaitley indicated at a briefing on Thursday, a day after the Rajya Sabha cleared the enabling Constitution Amendment Bill for ushering in the tax reform, that an “unreasonable cap” on the standard rate of tax could burden the Centre with compensation that will have to be paid to states for any potential revenue loss suffered by them. And this could jeopardize the fiscal consolidation roadmap of the Central government.

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With the cesses and surcharges set to be subsumed into the broader GST regime, a senior Finance ministry official confirmed to The Indian Express that the standard rate will, in all likelihood, be well higher that 18 per cent and could be closer to 27 per cent in order to allay trepidation among states over potential loss of revenue if the rate were to be kept low.

WATCH VIDEO: GST Bill: The Day After, Government Hints At Rate Higher Than 18 Per Cent

 

Jaitley said that the GST rate would only “gradually slide down” from the existing level of about 27 per cent, even though he said that it could be lower to begin with.

“Obviously, I indicated that currently what the taxpayers are paying is phenomenally much higher.for almost 60-70 per cent of the commodities on a weighted average, you are paying 27 per cent plus a large number of other small taxes. Some of the states have even called it 30-32 per cent or even more,” he said.

States have made a strong pitch against reducing the rate to 18 per cent from the current average tax level of over 27 per cent saying this may adversely affect their tax collections. “…the guiding principle laid by the empowered committee (of state finance ministers) is that this rate has to come down. Now it will gradually slide down, but even in the first instance it will come down. That’s the clear intention that they have expressed, this will have to be married with their second intent that states need enough money for their own developmental activities,” Jaitley said, adding that the GST Council will take a call on the rate.

Asked whether the Centre will mention the GST rate in the Central GST (CGST Bill) being planned for the winter session in November, Jaitley said this was a hypothetical question since the first draft hasn’t been approved by the Council. “How can I commit as to what the nature of that draft and what the content of the rate itself would be and therefore on a presumptive basis, for me to say, as to what will be the nature of that law would not be fair,” Jaitley said.

As regards the Congress demand of keeping the GST rate low at 18 per cent, Jaitley said an “unreasonable” cap would increase the revenue deficit and a Finance Minister cannot afford to do that. “There is a difference between being responsible at present and being responsible in past. A present Finance Minister cannot say that you collect less revenue but increase your spending,” Jaitley said.

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Apart from fixing the rate, deciding on exempt items and ensuring no dual control by the Centre and states are among the seven key challenges which have to be overcome before GST can be rolled out by April 1, 2017, Revenue Secretary Hasmukh Adhia said. Other challenges in implementation of the tax regime include: calculation of revenue base of Centre and states and compensation requirements, structure of GST rates, list of exemptions, forming of consensus on Model GST Bill, threshold limits, compounding limits and cross empowerment to mitigate ill-effects of dual control.

On the compensation which needs to be paid to the states, Adhia said the amount can only be quantified after the GST rate is decided. He said consultations are on with regard to the threshold limit of imposition of GST. While some states want the threshold to be Rs 10 lakh, the Centre wants it to be pegged at Rs 25 lakh.

Elaborating on the aspect of dual control, Adhia said there cannot be a situation where one trader receives notice from both the Centre and a state. He said the government will address this issue of dual control.

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The GST Constitutional Amendment Bill has to now go back to the Lok Sabha for ratification. Once it is approved by Parliament and 50 per cent of state legislatures, the GST Council will have to work out the model GST Bills which will provide operational details. “Within the next 30 days, we expect 50 per cent of the states — about 16 — to approve the Constitution Amendment Bill,” Adhia said.