The crucial three-day meeting of the all-powerful GST Council has begun. It will decide on the tax rate and sort out issues like compensation formula for rollout of the new indirect tax regime from April 1, 2017.
With the finance ministry setting November 22 as the deadline for building consensus on all the issues in the Council, the upcoming meeting is significant as it will decide on the most crucial aspect of tax rate that will have a bearing on the common man.
At its previous meeting last month, the GST Council, which has all state finance ministers as members, had finalised area-based exemptions and how 11 states, mostly in the North-East and hilly regions, will be treated under the new tax regime.
The meeting will also deliberate on the vexed issue of the Centre retaining power to assess 11 lakh service tax filers under the new dispensation.
While a decision to this effect was taken at the first meeting of the GST Council, at least two states dithered on approving the minutes of the meeting, saying they are not in favour of losing power of assessment of these assessees.
The finance ministry will try and reach a consensus on the key issues so that the subsequent central GST (CGST) and integrated GST (IGST) legislations can be introduced in the month-long Winter Session of Parliament beginning November 16.
Last year, a panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18 per cent as the standard rate for bulk of goods and services while recommending 12 per cent for low rate goods and 40 per cent for demerit ones like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 per cent.
Finance Minister Arun Jaitley had last week said tax on environment-unfriendly products will be “distinct” from others in the GST framework.
As for the formula for the Centre compensating loss of revenue to states, 3-4 alternatives were discussed at the first meet, but a decision could not be reached.