Advocate Anandaday Misshra

GST Council is yet to decide on GST rate structure. Since, the last meeting which concluded on 19th October,2016 could not result a consensus amongst states on various reasons.

What prevented a Consensus ?

The following are the reasons which acted as a barrier in making consenus on GST rate structure :

  1. Source of funding the compensation to states has to be finalised first.
  2. Levy of Cess on demerit goods as suggested by Central Government was objected as contrary to the spirit and object of GST.
  3. Consolidated fund model was proposed by states for compensation of loses.

What was Decided ?

Fortunately, the modalities for calculating the losses incurred by states were agreed with consensus in GST Council . But , a decision on the compensation funding mechanism is still a big challenge.

Which Cess was Proposed ?

The Centre proposed a Cess on demerit goods in the name of  Clean Environment Cess. Whereas, all other taxes and Cess would be subsumed in GST, but it was not acceptable to the States.

The States have their  logic that a levy of Cess will not result into subsuming of all taxes. Whereas, GST is being implemented to subsume all  taxes. Whereas, the Centre finds Cess to be a best way out to make a pool for funding compensation to States.

Next Meeting of GST Council

The next meeting of GST Council is scheduled on 3rd November 2016.

Statements of Finance Minister & Revenue Secretary

The Finance Minister , Mr. Arun Jaitley told the reporters that

We will finalise the tax structure at the next meeting… it can be frozen only after deciding whether compensation to States is to be funded out of the rate structure itself or from some special cess or some third source.”

Whereas, Revenue Secretary, Mr. Hasmukh Adhia stated the following :

The members had sought time for discussing with their State governments the four-slab rate structure, ranging from zero to 26 per cent, the Centre has proposed. “The Council will be able to finalise the GST rates structure after consensus is reached on the funding mechanism for compensations,”

If instead of the proposed cess on GST, simply the rate of the GST on demerit goods is raised, as suggested by some States, then, the GST rate structure would end up with a multitude of tax slabs”

“For example, he said, the current rate of incidence of taxes may differ for aerated beverages, cigarettes, bidis and luxury cars.”

If you have to put each in rate structure, one challenge is how many slabs can you have then… Can you have 26, 45, 75 per cent slabs? There are commodities where the effective rate of taxation currently is more than 100 per cent. Now the question is, is it feasible to have so many slabs of taxation in GST,”

The Council could not discuss the proposed GST rate of 4 per cent for gold”

Conclusion

The time frame of 1st April,2017 will be a big challenge, if the GST Council could not make a consensus on Compensation fund module and GST rate structure in next meeting on 3rd November 2016.

by Anandaday Misshra, Founder Advocate , AMLEGALS 

For an advance level understanding of GST , keep referring www.gstprofs.in .

(The author is one of the leading litigation and advisory advocate.  He is an eminent speaker and author on various laws including GST. He handles cases in various Tribunals  & High Courts of India. He can be contacted on anand@amlegals.com .For more, please refer www.amlegals.com )

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I am a litigation & arbitration advocate. I am founder of a leading full service law firm AMLEGALS. I handle litigation in indirect taxes, Insolvency & Bankruptcy Code, IPR, Arbitration, Contracts etc in High Courts, Tribunals-NCLT,CESTAT,NCLAT etc, Arbitral Tribunals and various Court of View Full Profile

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4 responses to “GST Council – A Battle Has Just Begun”

  1. Ghanshyam says:

    Rs 20 lac turnover limit should be brought down to Rs 10 lac nationwide to avoid loop holes or in other simple words, to put a control over unaccounted business practice. It is not a battle, it is a well beginning, we should be optimist.

    Fix cess of 0.5% on GST for the fisrt five years to compensate loss, rate structure should be 6.5%, 12.5%, 16.5%, 26.5% and 40.5%, stable for the first 5 years.

    4.5% GST should be levied on Gold ornaments of above One lac worth.

  2. Vikas Sharma says:

    Dear Mr Rajeev K Bharti

    Battle does not mean it is negative. The content has no negativity .Rater, it is at par an endeavour . Further, i must share that positivity or negaitivity is not be judged from the word but from the pith and substance of the content . I hope ,you cant even find a single thing in this content to be negative.

    Anyway,thanks for patiently reading the article .

    On behalf of Shri Anandaday Misshra, Advocate

  3. Rajeev K Bharti says:

    I think we people should be optimistic rather pessimist. First time in the history of Independent India, Govt. is ahead of Corporate. We should appreciate its effort.
    And on rate, all the stake holder are discussing on the issue and they sit for same. Ur title -A Battle has just begun is not sounding positive.
    Thanks

  4. Vijay Kumar Dadoo Age 72 years says:

    It appears the GST will create problem. The GST is due for application right from the turnover of Rs. 20 Lacs and 10 Lacs in some states(including Uttarakhand).
    The parties would not be able to avail of the input credits, and more of more people would try to show less turnover. Any change from present, except raising Vat (GST) to 18% and more

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