NEW DELHI: The Centre and states made substantial progress on the goods and services tax by arriving at several decisions on the levy at the first meeting of the GST Council, bolstering expectations that the government will be able to meet an April 1, 2017 deadline for its rollout. The two-day inaugural meeting of the council, consisting of state and central representatives, has set the stage for a discussion on rules and what the eventual rates will be. The council will meet next on September 30 to finalise rules and subsequently on October 17-19 to thrash out the rates. Given that views among the states and the Centre vary widely on rates, that meeting could see some tough negotiations. The government doesn’t want to set the rate too high as that could be inflationary and make it a harder sell, while states are wary of losing too much revenue with a low rate. On Friday, the council agreed to an exemption threshold of Rs 20 lakh for all states barring the north-east and hill-area states. It also adopted a cross-empowerment model for tax administration, a formula for compensating states and agreed to subsume all cesses into the new tax. “All decisions were taken by consensus at the first GST Council meeting spread over two days,” Finance Minister Arun Jaitley told reporters on Friday after the meeting ended. “We did not require voting on any issue.” Jaitley, who is chairman of the council, said significant progress had been made on all agenda items.
On Thursday, the first day of the meeting, the council bound itself to rules of functioning and agreed to a work and agenda schedule. The GST threshold was set at Rs 10 lakh for the north-east and hill states, which had been given a carve-out in the constitutional amendment that paved the way for GST. “We discussed the issue informally before the meeting and then it was formally taken up,” Jaitley said. “It was decided that those with turnover below Rs 20 lakh would be exempted unde GST.” Some states including UP had favoured a lower threshold than the Rs 25 lakh proposed earlier. “We will try to finalise the rates and the slabs during our meeting on October 17, 18 and 19,” said the finance minister. Experts welcomed the raft of decisions at the first council meeting. “The inclusion of cesses in the GST would significantly benefit all businesses and would increase the available pool of credits which can be used to offset the GST liability,” said MS Mani, senior director at Deloitte Haskins & Sells LLP. “Industry would also welcome the move to have a single assessing authority, instead of having a dual system of assessment and scrutiny, which was a major concern for businesses,” said Pratik P Jain, leader, indirect tax, PwC India. “The decision that all cesses would also be subsumed in GST provides much-needed clarity to industry.”