Dr. Sanjiv Agarwal

As per the Constitution as amended, GST Council is required to be Constituted under article 279A of the Constitution which was so done by the President on 12th September, 2016 vide Notification dated  10.09.2016. New Article 279A of the Constitution was notified to come into force w.e.f. 12.09.2016 and vide Notification dated 15.09.2016, the President of India Constituted the GST Council.

Clause 279A

According to article 279A of the Constitution as made operative w.e.f. 12.09.2016, the President shall, within sixty days from the date of commencement of the Constitution (One Hundred and Twenty-second Amendment) Act, 2014, by order, constitute a Council to be called the Goods and Services Tax Council.

Recommendations to be made by Council

As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.

Decisions / issues considered at First Meeting of GSTC (22-23 September, 2016)

The first meeting of the newly constituted GST Council was held on 22-23 September, 2016 in which following issues were decided / considered:

  • Rules for conduct of business at meetings.
  • Time table of GSTC meetings was set keeping the April 1st, 2017 deadline.
  • Consensus on composition scheme with gross turnover of Rs. 50 lakh as limit wherein tax payers will pay 1-2 percent tax.
  • Threshold exemption limit fixed at Rs. 20 lakh in general and Rs. 10 lakh for north east states / hill states.
  • Broad consensus on dual control of assessees- Taxpayers with annual turnover upto Rs. 1.5 crores shall be assessed by states and assessees with annual turnover exceeding Rs. 1.5 crore to be assessed by both centre and states (cross empowerment model).
  • Existing Service Tax assessees (about 11 lakh) to remain with Central Government.
  • Base year for determining compensation for revenue loss projection to be financial year 2015-16.
  • Compensation formula to take into account all the cesses presently levied.
  • Assessees to be divided between the Centre and States based on risk assessment. Whichever of the two tax authorities (Centre or State) has a higher risk assessment will assess.

Decisions / issues considered at 2nd Meeting of GSTC (30.09.2016)

The major agenda for the second meeting of the GST Council held on 30 September, 2016 was to consider and approve the draft rules released for GST in relation to registration, payment, return, refund etc. Though the draft rules were put in public domain only on 27th September leaving few hours for public to give feedback, the GSTC approved the said rules in just one sitting. The decisions, inter alia, are supposed to include the following –

a) To continue with area based exemptions and incentives of excise duly available to north east states and hill states but to be provided by way of refund and not by way of exemptions, as presently done. Presently, centre allows such exemption to eleven states.

b) There will be levy of tax on all exempted entities under GST and the Centre or the State, as the case may be, that gets the tax shall have to reimburse such tax collected to the exempted entity. However, it is not clear as to whether such refund shall be automatic through GSTN or entity will have to claim refund. States ought to agree to this.

c) States have to decide on the specific industrial exemptions which they may like to continue to provide to business entities / goods / services. The details are yet to be worked out.

d) Reimbursement of taxes by the Union shall be examined as about 40-48 percent of the taxes from central pool goes back to states as per devolution formula. Centre wants states to give the refund.

e) Control of Service Tax assessees, though decided in first meeting, shall be re-examined as some states have raised concerns over Centre’s control on services such as works contracts, software contracts, restaurant supplies etc. It is expected that a group of CBEC officials shall work out a formula which is acceptable to all. However, this appears to be a grey area which may invite issues from the states.

f) Approval of draft rules for returns, payment, registration, refund and invoices / debit notes / credit notes

g) Minutes of the first meeting held on 23rd September could not be adopted / confirmed.

Agenda for 3rd Meeting of GSTC (18-20 October, 2016)

The GSTC decided to hold its third meeting on 18-20 October, 2016 wherein following issues may be considered –

a) Calculation of annual incremental tax revenue to decide projection for compensation for likely possible loss of revenue to the states in GST regime.

b) Dual control over assessees

c) Control over Service Tax assessees

d) Rates of GST

e) Exemptions and negative list

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