GST council pre-decided meeting turns out today for some crucial decision which will infiltrate the Indian economy and its financial structure from now onwards. The main agenda has turned out to be the final taxation rate on which the GST will be operational while other issues like compensation and service tax assessment will also be looked upon. All the state finance ministers will be a part of this significant meeting.
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The meeting will head towards the tax rate decision first as this is the most sticky issue which is arising in the due course of implementation. The worthwhile keynote is that arriving at a rate which can be suitable for the neutrality of states revenue and in the meanwhile also accepted by the political parties.
Chief economic advisor, Arvind Subramanian had suggested 17-18 percent as the standard rate for the bulk of goods and services while recommending 12 percent for low rate goods and 40 percent for demerit ones like a luxury car, etc. For precious metal, it recommended a range of 2-6 percent.
All the discussion comes to a hold in the front of Congress which is pressing for an 18 percent tax rate which is quite low for other states. However, the chances seem very weak that a tax rate would be finalized in the lieu of sensitive environment.
Coming to the compensation factor, the revenue loss is something very deep and consolidating issue for the GST council to resolve in a much fair way. Some of the suggestion, far now concerned is that a state can be compensated if the revenue under GST falls short of the average tax earnings in the best three years out of the past five years.
Secondly, of the five years, two outliers are left out and an average is taken. If the revenue under GST is short of this, then states get compensated. And then there is if a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then the state gets compensated. The base year would be 2015-16.
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The service tax assessment issue also heated after two states were discontented with center retaining the power of assessing the taxation league. The decision was taken in the first meeting itself but was not accepted immediately and still having some concern to look upon. The meeting aims to bring level between all the discrepancies.
All the mentioned issues will be in the first talks and also the government is looking to introduce the legislations for central GST (CGST) and integrated GST (IGST) in upcoming winter sessions commencing from 16 November.
