The Central government moved another step closer towards the implementation of the country’s most ambitious indirect tax reform of Goods and Services Tax which is set to roll out from July 1 this fiscal. The GST Council chaired by Union Finance Minister Arun Jaitley on Thursday approved the drafts of the remaining two key laws namely — State GST and Union Territories GST. Addressing the conference after the 12th GST Council meeting, Jaitley said: “Today the GST Council gave its approval to the State GST and the Union Territories GST laws and cleared the revised drafts of three other crucial bills. Some changes were required in Central GST bill, Interstate GST bill and the Compensation law that were approved earlier, and those were also discussed and the changes were approved by the council.”
With all the five enabling draft laws having been approved by the GST Council, the government is hopeful of the likely rollout of the new indirect tax regime from July 1 this year. Jaitley said that the supporting GST laws will now be taken to the Union Cabinet and then to Parliament for approval.
“Four of these laws, CGST, IGST, UTGST and Compensation law, will be required to be passed by parliament…The SGST law now will be taken by the respective state governments through its cabinets to the respective state assemblies,” he said. The Council will now be discussing the formulation of rules that will govern the new tax, Jaitley said, adding that the committee will be meeting again on March 31 to approve four of those regulations while it will also consider the changes to five others that were approved earlier.
“After these rules are approved, one major action will be required which is with regard to the fitment of various commodities into the tax slabs,” he said. Apart from the four slab rates that has been already decided, the Council on Thursday also decided to impose a cess on luxury and other goods with a cap of 15 per cent.
The maximum cess on pan masala has been capped at 135 per cent and for tobacco it is capped at 290 per cent or Rs 4,170 per 1000 sticks, sources said. Some states wanted the government should not levy any cess on beedis, they said.
The environment cess has been capped at Rs 400 per tonne. The actual cess on these items will be decided later but the cap has been provided in the draft legislation, the sources said. “We will maintain roughly the same leek of tax incidence as it applies today,” a finance ministry official said.
The actual cess on demerit goods, which will help create a corpus for compensating states for any loss of revenue from GST implementation in the first five years, may be lower than the cap as the Council has kept a “little” headroom for future exigencies, Jaitley said.
At present, the Council has decided to imposed this cess on 4 items namely tobacco, pan masala, aerated drinks, luxury cars. The GST Council had last year decided on four tax slab rates, 5 per cent , 12 per cent, 18 per cent and 28 per cent, with another “zero tax rate” on several items that approximately constitute half of the consumer price index basket including food grains.
Cess will be imposed on these products in addition to GST to raise resources for paying compensation to states for any revenue loss from GST implementation, the official added.