It will take up the issue today along with compensation to states losing revenue and dual control
The GST Council, which met for the first time on Thursday, failed to arrive at a consensus on the contentious issue of exemption threshold for applicability of the new unified indirect tax – goods and services tax (GST). The meeting, which was chaired by Union finance minister Arun Jaitley, will meet again today to come to a consensus on exemption limit under GST.
Jaitley said the two other agenda that will be taken up today would be compensation to states that are expected lose revenue on account of the new levy and provision for cross empowerment or dual control between the Centre and states for smooth administrative purpose.
The minister said exemption limit figures of Rs 10 lakh and Rs 25 lakh had emerged during the meeting but there was no unanimity on one number.
States like Uttar Pradesh (UP), Tamil Nadu, West Bengal and others, which would lose substantial amount of revenues if the cut-off limit was fixed at Rs 25 lakh, were insistent on a threshold of Rs10 lakh while those states which did not earn much in that band were agreeable with a higher cap.
Kerala finance minister Thomas Isaac said North-eastern states, where 80-90% of traders have annual turnover of below Rs 25 lakh have been exempted.
"For Northeastern states 80-90% of traders would be below Rs25 lakh annual turnover. They will be exempted, that consensus has already been reached. The issue is with respect to big states like UP (7.8%), West Bengal, Tamil Nadu and others, which were insistent that it should be Rs 10 lakh," he said.
The compounding limit suggested for exemption was Rs 50 lakh, which would be allowed to only traders, keeping services and manufacture out.
Isaac, who participated in the meeting, said Tamil Nadu wanted voting rights proportionate to either the population or the GDP of a state. This, he said, was opposed by many states.
Talking to the press after the meeting, Jaitley said the Council members had agreed upon two agendas. One was rules of conduct and business and other was schedule for GST, keeping April 1, 2017 as the deadline for its rollout.
"We have finalised the draft rule with regard to functioning of the Council. To resolve all outstanding issues, a draft timetable was given which also has been adopted," he said.
The FM said the Central GST (CGST) and integrated GST (iGST) and state GST (SGST) will be passed by the Central Parliament and state legislatures in the winter session.
"Starting from September 22, we have roughly estimated that we have two months till the November 22 to resolve all outstanding issues," he said.
Isaac said the two issues which would be seriously considered today would be the base year for the computation of compensation and dual control for collection of taxes.
He said suggestions given by states on what should be the base year was the average of the best three years of the last six years. The government was looking at a base year, which was the last financial year. For VAT, the government had taken the best three years of the last five years.
"We are arguing that it (base year) should be the average of the best three years of last six years. This is a serious issue that will be debated tomorrow," he said.
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