Moving on fast track to roll out GST from April 1, 2017, the Cabinet today approved setting up of all powerful GST Council, which will decide on the tax rate, exempted goods and the threshold by November 22. The first meeting of the Council, to be chaired by Union Finance Minister, will be held on September 22 and 23.
It will comprise Minister of State for Finance in charge of Revenue Department and state finance ministers as members. Union Revenue Secretary will be the ex-officio secretary to the Council, but will have no voting rights.
The Cabinet, headed by Prime Minister Narendra Modi, today "approved setting up of GST Council and setting up its Secretariat," an official statement said. Talking to reporters, Revenue Secretary Hasmukh Adhia said the government is running ahead of schedule on GST roll out and is all geared up to meet the April 1, 2017, deadline.
"Now it is for the GST Council to thrash out all the issues within the time limit of two months. We have set a time limit of two months for discussion and final decision on all the major aspects. Now whether that's going to be feasible, that we have to watch and see.
"So from September 22 to November 22, should be a reasonable time limit for discussing and thrashing out the major issues," he said. Asked if the GST rate, exemptions and threshold would be decided by the Council before November 22 for inclusion in the CGST law, Adhia said: "It should be. Yes".
The government is planning to introduce GST legislations -- Central GST (CGST) and Integrated GST (IGST) -- in Winter Session of Parliament in November. Adhia said state have the flexibility to nominate either finance or taxation or any other minister to the GST Council and he has already written to the state chief secretaries in this regard.
So far, Adhia said "we are ahead of the time schedule. The main thing to be done now is to call as many meetings of the GST Council and try and sort out all the major issues so that we are ready with the draft law completely and the industry can get itself ready. GST, which is considered as the biggest tax reform since independence, will subsume excise and service tax, and various other local levies including VAT and octroi.
While the Centre will have one-third vote, states together will have two-thirds in the GST Council. To adopt a resolution, a three-fourths majority will be required. Asked about the agenda for the Council meeting later this month, Adhia said it is yet to be decided.
"The GST Council will decide whether the rate would form part of CGST Bill... Already, two committees have given their report based on which we will put up an agenda before the GST Council and the Council will deliberate and decide," Adhia said.
Last year, a panel headed by Chief Economic Advisor Arvind Subramanian had suggested 17-18 per cent as the standard rate for bulk of goods and services while recommending 12 per cent for low rate goods and 40 per cent for demerit ones like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 per cent.
A sub-committee of empowered committee of state finance ministers on GST had earlier suggested 27 per cent revenue neutral rate. But the rate needed to be reworked in view of taxation of petroleum products.
While liquor has been completely kept out of the GST ambit, petroleum products like petrol and diesel will be part of the new regime from a date to be decided by the GST Council. The Parliamentary Select Committee has favoured moderate goods and services tax rate of less than 20 per cent.
The Cabinet in today's meeting also decided to provide for adequate funds for meeting the recurring and non-recurring expenses of the GST Council Secretariat, the entire cost for which shall be borne by the central government. The GST Council Secretariat shall be manned by officers taken on deputation from both central and state governments, the statement said.
While the GST Council will be created as per Article 279A of the amended Constitution, the GST Council Secretariat will have its office in New Delhi. Revenue Secretary will be the ex-officio secretary of the GST Council, which will have chairperson of the Central Board of Excise and Customs (CBEC) as a permanent invitee (non-voting).
Also, a post of additional secretary in the GST Council Secretariat and four posts of Commissioner (at the level of joint secretary to the central government) will be created.
The GST Council will make recommendations to the Union and states on important issues related to GST. These include goods and services that may be subjected to tax or exempted, principles governing place of supply, thresholds, GST rates including floor with bands and special rates for raising additional resources during natural calamities and special provisions for certain states.
The Constitution (122nd Amendment) Bill, 2016, for introduction of the goods and services tax in the country was accorded assent by the President on September 8 and the same has been notified as the Constitution (One Hundred and First Amendment) Act, 2016.
As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A. The notification for bringing into force Article 279A with effect from September 12, 2016 was issued on September 10, 2016.
Parliament on August 8 had passed the Bill, which then went to states for ratification. A Constitution Amendment Bill needs to be ratified by Assemblies of at least 50 per cent of 29 states and 2 Union Territories.
The Bill was sent to the President's secretariat after as many as 19 states -- BJP-ruled Assam being the first -- ratified the same. The states and the Centre are working overtime and talking to stakeholders to draft the Central GST, State GST and Integrated GST laws, which are to be passed in the Winter Session of Parliament.
CGST and IGST will be drafted on the basis of the model GST law. The states will draft their respective State GST (SGST) laws with minor variation incorporating state-based exemptions. The IGST law will deal in inter-state movement of goods and services.