The GST council, headed by the finance minister, will
meet next on January 16 to hammer out a consensus on
outstanding issues and fix an implementation date.
GST will subsume a web of local and central levies
such as excise, VAT, service tax and octroi into a
The GST Council has already decided on a four-slab GST
rate structure.Separately, a bureaucrats’ panel is
working on the “classification” exercise, a
comprehensive list clubbing thousands of goods and
services into different rate categories.
After GST, Part B of the Union Budget speech, will only
have income and other direct taxes and customs
duties, a major break from the past when every minor
indirect tax change had market and sectoral
implications. With GST now heading for a mid-year
roll-out, the Budget for 2017-18, will factor in
only expected half-year revenue estimates from
existing central indirect levies, an official told
The finance minister may also give additional Rs
20,000-25,000 crore as compensation to offset tax
revenue loss in the wake of the currency culling
move. The amount could be paid to states in 2017-18,
as part of the GST compensation corpus of Rs 55,000
crore, the official said.
Under GST law, the Centre will have to fully compensate
states for any revenue loss for five years after
migrating to the new tax system. The Centre
estimates total compensation to states for losses
arising from a transition to GST to be around Rs
55,000 crore in the first year.
This will be met through a corpus generated by the levy
of the clean environment cess on coal, also cesses
to be levied on demerit goods such as tobacco,
luxury cars, pan masala and aerated drinks. Many
states are now pushing the Centre for a grand
bargain of sorts, seeking higher compensation for
revenue loss on account of demonetisation.
States have argued that the economy-wide cash-crunch
following the unexpected ban on Rs 500 and Rs 1000
currency notes in November has hurt revenues.
State governments said that demonetisation has
curtailed consumer spending, affecting local tax
collections and upsetting their fiscal plans for
The Centre and states are still negotiating to iron out
differences on many details including the
contentious issues of “dual control” and taxing
rights of goods moved through high seas. The issue
of “dual control” or cross empowerment has been the
bone of contention between the Centre and the
States, despite the issue being discussed at couple
of meetings of the GST council.
The discussion had largely remained inconclusive, with
States demanding that assessees should be divided
horizontally with Rs 1.5 crore be the cut-off base.
Under this model, states would assess businesses
with an annual turnover Rs 1.5 crore, while both the
Centre and states would do so for businesses having
higher turnover. The Centre is pushing for a
vertical division of the assessee-base without a
Under this model, both states and the Union government
will have oversight powers on a certain fixed
proportion based on the number of assessees, rather
than the turnover.
Source::: Money Control