Day one of the Goods and Services Tax (GST) Council meeting brought to the fore divergent views regarding threshold for annual turnover for the applicability of the indirect tax on Thursday. While 11 BJP-ruled and smaller states agreed for an annual turnover limit of Rs 10 lakh, 12-13 states agreed for a threshold limit of Rs 25 lakh. Delhi asked for a threshold limit higher than Rs 25 lakh, while 7-8 states, including Uttar Pradesh, had contentions regarding the two slabs of turnover limit for exclusion from levy of the GST.
Government officials indicated that a final view on the matter will be taken in subsequent meetings. “With regard to threshold for exemptions, there are two sets of suggestions which have come. We have to converge on both views, and both on officers and ministers track. We will continue the meeting tomorrow (Friday) and thereafter we will be able to converge to one particular figure as far as the exemptions are concerned,” finance minister Arun Jaitley said after the meeting.
Delhi’s finance minister and Deputy Chief Minister Manish Sisodia said the opinion regarding the turnover threshold for GST levy was divided and it will be taken up for discussion by the council when they meet later.
Currently, the threshold for Value Added Tax (VAT) is Rs 10 lakh in most states. A panel headed by Chief Economic Adviser Arvind Subramanian had last December suggested a higher annual turnover threshold of Rs 40 lakh, above which GST will be levied on traders.
Some states such as Tamil Nadu and Uttar Pradesh also demanded higher weightage from the existing one vote per state, citing higher population and contribution to the country’s GDP. The demand was overruled and the present voting structure with two-third votes of states and one-third vote of Centre will continue. To adopt a resolution, a three-fourths majority will be required.
The Centre and states, however, agreed on the timeline for GST to be rolled out from April 1, 2017, with the Union finance minister stating that the timetable has been set keeping the intended April 1 deadline in mind. “The target also involves the passage of CGST and IGST laws in Parliament and then by the state legislatures the state GST law in the winter session itself … Today, starting from September 22, we roughly have two months time till November 22 to resolve all outstanding issues and therefore a draft timetable was given which also has been adopted,” Jaitley said.
A consensus on compounding scheme for traders was arrived at the GST Council meeting, with a flat 1-2 per cent tax rate for traders with gross turnover cut-off of Rs 50 lakh, Revenue Secretary Hasmukh Adhia said. The composition scheme provides for easier method of calculating tax liability and it allows option for GST registration for dealers with turnover below the compounding cut-off to reduce the administration cost associated with collection of tax from small traders.
Also, states and Centre agreed on the continuation of the Empowered Committee of State Finance Ministers. Adhia, however, said that the committee will not discuss any issue related to GST but will focus on other state-related issues such as devolution of taxes to states and Plan finance. There was no decision regarding the selection of vice chairman for the newly constituted GST Council in Thursday’s meeting.
“If there is need of voting, then he will be selected by that process. Otherwise, if there is consensus for one candidate, then he will be elected as the vice chairman,” Adhia said.
There was no discussion on GST rates by the Council and it will be taken up in its subsequent meetings. “The GST Council at the end of its meeting tomorrow (Friday) will decide on the dates for the next meeting of the Council. The Council will meet for a number of days in quick succession so that other issues such as fixation of the rate etc, and whatever is outstanding from today’s meeting could be worked out,” Jaitley said.
The GST Council, at its meeting on Friday, will also discuss issues of dual control and compensation.
There will also be clarity regarding the selection of base year for purpose of calculation of compensation to states for loss suffered due to GST.