Revenue Secretary Hasmukh Adhia chaired the meeting to finalise the draft GST laws
and the meeting would continue on Tuesday.
Tax officers of both central and state governments today discussed
various aspects of draft GST laws, the tax rate on various goods and
services and exempted ones under the indirect tax regime, which is likely
to kick in from April next year. Revenue Secretary Hasmukh Adhia chaired
the meeting to finalise the draft GST laws and the meeting would continue
Officials said the report of the officers committee will be taken up by the
GST Council, which is headed by Union Finance Minister and has state
ministers as members, at its next meeting on November 25. At its last meeting, the Council agreed on a four-slab structure – 5, 12, 18 and 28 per cent — along with a cess on luxury and ‘sin’ goods, including tobacco.
Under the structure, the clean energy cess and that of luxury items and
demerit goods will be utilised to create a Rs 50,000 crore fund every year
which will be utilised to compensate the states for first five years of GST
rollout. With a view to safeguarding the interest of poor and keeping
inflation in check, it has been decided that half the items in the CPI basket
like foodgrains will not be taxed at all.
However, the committee of state and central officers will have to together
work out the final list of items for each tax bracket.
There have been indications that soap, oil, shaving stick, toothpaste and
such products will likely fall in the 18 per cent bracket, similar to most
services. Finance Minister Arun Jaitley has already said the tax incidence
on goods will be worked out in a manner such that the GST levy will be
somewhere close to the current tax rate (excise duty plus VAT).
The items and the tax bracket will form part of the Central GST (CGST)
legislation, which the GST Council will take up for discussion at its meeting
on Friday. The meeting will also approve the Integrated GST (IGST) and the
draft compensation law.
The GST Compensation Bill will provide a legal backing to the Centre’s
promise to compensate the states if their revenue growth rate falls below
14 per cent in the first five years of the GST rollout. The base year for
calculating the revenue of a state has been decided as 2015-16.
The compensation law would have the taxes subsumed and the revenue
forgone by each state on account of GST rollout. It will give details on how
the Centre plans to raise funds for compensating the revenue loss.
The government aims to kick off GST from April next year. The Goods and
Services Tax (GST) will subsume excise, service tax, VAT and other local