GST roll-out likely to be postponed to June 1

The Goods and Services Tax (GST) Bill is touted to be one of the biggest tax reforms in India.

It is a comprehensive nationwide indirect tax on the manufacture, sale, and consumption of goods and services.

It helps in bringing into effect a single tax instead of the multiple, fragmented taxes levied as various forms of indirect taxes at present.

The GST Bill sought to set up a GST Council that would develop a harmonized market of goods and services.

The President should constitute the Council within 60 days of the enforcement of the Act.

The Council would comprise the Union Finance Minister (as the body's Chairman), the Union Minister of State for Finance and Finance/Taxation Minister of each state government.

The states were divided over the ratification or approval of the minutes of the GST Council's first meeting.

The Council finalized registration rules, payment rules, returns, refunds, and invoices in the second meeting.

Service tax assessment, GST rate, and formula for compensation for the states (if there's revenue shortfall due to GST implementation) would be discussed at the next meeting on 18-20 Oct'16.

Jaitley said the Council would determine the states which would be exempted from GST. The states would decide on such entities as they would reimburse tax to them.

He stated 58% of the tax collected would belong to the Centre while 42% would go to the states, as per the 14th Finance Commission.

Jaitley added they are trying to make every decision through consensus.

After the Council had agreed on two key issues (GST rules and exemption), Jaitley spoke about service tax assessment.

He said an arrangement for the same was finalized for continuing with the old system and transferring it to the states once the officers are trained.

On services that are partly taxed by both the Centre and states, he said experts would examine such services.

On the first day of their 3-day meeting, the GST council made considerable headway in aspects such a finalizing the tax rate and the compensation formula.

GST will have 2 standard rates, 12% and 18%; food items and necessities would be taxed at 6% while luxury goods would be taxed at 26%.

An additional cess will be levied upon ultra-luxury products like tobacco.

After much deliberation, the GST Council is said to have agreed upon tax rates for implementing GST, with four brackets of 5, 12, 18 and 28% for various goods.

In addition, FInance Minister Arun Jaitley said luxury goods like cigarettes, tobacco, aerated drinks, etc are expected to see up to 40% taxation.

However, the proposed tax structure now has to be approved by Parliament.

The Centre released the draft of the the central GST law, the integrated GST law and the compensation law, which form the framework for the GST.

There will be an anti-profiteering clause, to ensure that businesses pass on benefits of tax reduction to consumers.

The drafts will be discussed by the GST council on 2-3 December, and then tabled in parliament.

With just three working days before the Winter Session of Parliament concludes, the government is rushing to clear bills linked to the GST; the central goods and service tax, integrated GST, and a compensation legislation have to be inked in this session for the GST to be rolled out in April.

However, the Winter Session was marred by multiple disruptions due to demonetization-related protests.

Uncertainty over cross empowerment and dual control continued even as the two-day Goods and Service Tax meet ended on Friday.

According to Finance Minister Arun Jaitley, the primary drafts of the Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) have been approved. He said that once they're passed by the parliament and state legislature, they will mirror each other.

With an unproductive Winter Session of Parliament, sources said it is now likely that the GST will be rolled out from 1 June; delays due to opposition protests after the demonetization scheme are to be blamed.

States argued that demonetization coupled with tax reform would cripple budgetary planning.

GST will now be introduced in the first half of the Budget Session.