Goods and Services Tax (GST) Council Meet on Jan 16, 2017


The Goods and Services Tax (GST) Council arrived at a consensus on contentious issues such as administrative control over tax payers in the new indirect tax regime on Monday, thus paving the way for GST to be introduced this year, although three months after the Centre’s original rollout deadline of April 1, 2017.

A few open points of consideration were discussed in the  meeting of the GST Council on 16 January 2017 including:  

(i) Dual control/ cross empowerment –

Though no consensus has been reached on the much-debated issue on the administrative split, the Finance Minister highlighted that majority of the states had a positive attitude on the issue during the meeting. As per reports, the states continue to insist for complete control over businesses having an annual turnover below 1.5 crore. The issue is expected to be discussed in the next meeting.  

(ii)Issue of jurisdictional power of states on territorial waters (12 nautical miles) –

Another issue which has arisen is the definition of 'state', and the power to levy taxes on supplies made from territorial waters. The state governments are of the view that the power to levy taxes on such transactions is with them, while the centre is of the view that such power lies with the union. There is ongoing litigation on the matter in the current regime. The matter is pending before the Supreme Court as well. Since the issue involves interpretation of the Constitution of India on powers of the state and centre, the matter has been referred to the Ministry of Law for legal interpretation, and would be discussed in the next meeting.

GST Council met on 16th January, 2017 for discussing the effective date on GST implementation and issues on cross empowerment. Summary of the discussion in the ninth GST Council meeting is as under:

1.     The GST rollout seems unlikely by 1st April, 2017.
2.     Differences between Centre and States on the ongoing issue of dual control has narrowed down.
3.     Territorial water and IGST issues close to being resolved.
4.     The next date for the meeting hasn’t been decided yet. But, the same is likely to be arranged after the Finance Budget.
FM Arun Jaitely addressed media after the conclusion of the ninth meeting and stated following:

-Deadline for the GST roll out defers to 1st July, 2017.
-  In relation to dual control, all the assessee with the turnover of upto 1.5 Crore will be assessed by States & Centre in the ratio of 10:90 respectively; while those assessee with the turnover above the said limit will be assessed by States & Centre equally i.e. 50:50.
- Centre will have power to levy IGST but, by enacting special provision States will also be cross empowered in the same ratio.
- Assessments in conflicts between the States w.r.t. place of supply will be taken up by the Centre only.
-  Area of 12 nautical miles into the territorial waters will be under Centre administration, however, States can collect tax on economic activities carried on therein.
- Changed draft GST laws shall be discussed by GST Council on February 18.

Meeting in February 2017

The Council will now meet on February 18 and approve the legislations that need to be cleared by Parliament and it is expected that those would be passed and ratified during the Budget session.
“Simultaneously, after they are free from the preparation of these drafts, the officials who are lending technical support will start working out the fitment of various rates into the various slabs,” Mr. Jaitley said. “This exercise will in all probability take us well into the month of March.”

“So I requested the Ministers to give their opinion about the realistic dates and there was a broad view that July 1 appears to be more realistic [for the rollout of GST],” he said. “Since it is a transactional tax, it can be introduced anytime. Also, they felt that industry and trade would have to be given adequate notice and once the rates are decided, the GST network would have to be modified suitably.”

As per the formula for dual control of assessees, 90 per cent of those with a GST turnover of Rs. 1.5 crore or less will be assessed for the purposes of scrutiny and audit by the States, and 10 per cent by the administrative machinery of the Centre.

“Those above a turnover of Rs. 1.5 crore would be assessed in the ratio of 50:50 between the Centre and the States,” the Finance Minister said.

Tuesday, 17th Jan 2017, 12:43:21 PM

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