States, Centre agree on GST norms – July 1 to be rollout date

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It took nine meetings and weeks of discussion for the government to finally break the deadlock over GST, with Finance Minister Mr. Arun Jaitley eventually getting all parties on board. With a consensus being reached, the Centre has set July 1, 2017 as the tentative date to roll-out the ambitious Goods and Services Tax. A meeting held yesterday saw a compromise reached between the states and the centre, paving the way for the centre to go ahead and implement GST.

The Finance Minister finally managed to break the deadlock over GST
The Finance Minister finally managed to break the deadlock over GST

Centre-States partnership on GST

Both the centre and the states agreed on a partnership module for GST, making use of Tamil Nadu’s proposal for the same.

According to the new tax structure:

  • A 9:1 ratio will be used for assessees with an annual turnover of Rs.1.5 crore or less. The state will scrutinise and audit 90% of such assessees, with the centre handling 10%.
  • A 1:1 ratio will be used for assessees with an annual turnover of more than Rs.1.5 crore. Both the states and centre will handle 50% or half of the cases each.

Let us understand each of these with an example, taking Tamil Nadu and the centre as the two auditing authorities.

Let’s assume that GST is applicable on 1,000 assessees who have an annual turnover of Rs.1 crore. Of these 1,000 assesses, the Tamil Nadu government will handle 900, with the centre handling the remaining 100 cases.

Similarly, if there are 1,000 cases where the annual turnover is more than Rs.1.5 crore, then the centre and state will divide them equally, each handling 500 cases.

As per the proposed model, only one authority will assess a given assessee, ensuring that instances of overstepping of jurisdiction are avoided.

While there were certain disagreements, arising mainly from West Bengal, a consensus was finally reached, with states agreeing to the sharing formula.

GST on “high seas”

Another concern states had pertained to GST in open waters. The meeting allayed these concerns as well, with states eligible to collect GST on transactions done in territorial waters within 12 nautical miles of their state boundary. 5 states, namely Maharashtra, Karnataka, Kerala, Gujarat, and Odisha had expressed concerns over loss of income on economic activities conducted in the ocean.

GST implementation

While the government might’ve reached an agreement with states, there is still some way to go before it can implement GST. The council, headed by Finance Minister Arun Jaitley will meet on February 18, aiming to discuss the final draft. The new draft will include these agreements, in addition to fine-tuning laws pertaining to GST. Once this is done, the laws have to be approved by the Parliament and state assemblies. Post this the council will determine the actual rate slabs, hoping to complete the entire process by July 1.

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