After the agreement on all GST bills, the rate fitment process needs to be addressed
At its twelfth meeting last Friday, the Goods and Services Tax (GST) Council cleared all the requisite State and Central-level legislative measures to implement the indirect tax regime. The State and Union Territories’ GST bills were approved along with necessary corrections to the three other GST Bills the Council had cleared previously — for Central GST, Integrated GST and compensation to States through a cess. This paves the way for State Assemblies and Parliament to ratify these laws quickly in order to meet the proposed July 1 rollout date for the system. Finance Minister Arun Jaitley has said the Union Cabinet will soon take up the four laws that the Centre has to steer through Parliament, while the respective State governments will take up the State GST law. Separately, officers from the States and the Centre are expected to finalise, by this weekend, drafts for four pending regulations out of a total of nine, that lay down the administrative procedures and processes to be followed by taxpayers under the GST regime. The Council will meet again on March 31 to consider those drafts. This will give the Centre enough buffer to make the transition to the new system.
Though industry has indicated that it needs at least three months to prepare for the GST once it sees the fine print, one major action will still be pending on April 1. That action — the fitment of thousands of commodities and services into the five GST rate slabs (zero, 5%, 12%, 18% and 28%) — could prove to be among the trickiest for the Council. The rate fitment process, unlike legislative nuances, is more susceptible to lobbying not just from different sections of industry, but also States that would like a favourable tax treatment for products and services they excel in. For instance, the GST Council has now approved a ceiling on the cess that could be imposed over and above the highest GST rate of 28% on pan masala, chewing tobacco and cigarettes, luxury cars and aerated drinks. For all such ‘sin goods’, the cess ceiling has been set higher under the GST than the level necessary to maintain the present level of taxation. But beedis have been kept out of the cess net altogether in order to avoid friction with States that could delay the broader reform. Despite such pulls and pressures, in a best-case scenario the rate-setting process should take at least a fortnight and the Council could meet some time in April to approve the rates. Giving lakhs of enterprises just about two months to switch to the GST regime, with all its implications for supply chains, pricing strategies and accounting systems, could lead to a messy start. The Centre must keep its mind open on pushing forward the rollout by a month or so, while industry should rise above heckling over rates and invest more lobbying energy on bigger worries, such as the GST’s penal anti-profiteering clauses.
At its twelfth meeting last Friday, the Goods and Services Tax (GST) Council cleared all the requisite State and Central-level legislative measures to implement the indirect tax regime. The State and Union Territories’ GST bills were approved along with necessary corrections to the three other GST Bills the Council had cleared previously — for Central GST, Integrated GST and compensation to States through a cess. This paves the way for State Assemblies and Parliament to ratify these laws quickly in order to meet the proposed July 1 rollout date for the system. Finance Minister Arun Jaitley has said the Union Cabinet will soon take up the four laws that the Centre has to steer through Parliament, while the respective State governments will take up the State GST law. Separately, officers from the States and the Centre are expected to finalise, by this weekend, drafts for four pending regulations out of a total of nine, that lay down the administrative procedures and processes to be followed by taxpayers under the GST regime. The Council will meet again on March 31 to consider those drafts. This will give the Centre enough buffer to make the transition to the new system.
Though industry has indicated that it needs at least three months to prepare for the GST once it sees the fine print, one major action will still be pending on April 1. That action — the fitment of thousands of commodities and services into the five GST rate slabs (zero, 5%, 12%, 18% and 28%) — could prove to be among the trickiest for the Council. The rate fitment process, unlike legislative nuances, is more susceptible to lobbying not just from different sections of industry, but also States that would like a favourable tax treatment for products and services they excel in. For instance, the GST Council has now approved a ceiling on the cess that could be imposed over and above the highest GST rate of 28% on pan masala, chewing tobacco and cigarettes, luxury cars and aerated drinks. For all such ‘sin goods’, the cess ceiling has been set higher under the GST than the level necessary to maintain the present level of taxation. But beedis have been kept out of the cess net altogether in order to avoid friction with States that could delay the broader reform. Despite such pulls and pressures, in a best-case scenario the rate-setting process should take at least a fortnight and the Council could meet some time in April to approve the rates. Giving lakhs of enterprises just about two months to switch to the GST regime, with all its implications for supply chains, pricing strategies and accounting systems, could lead to a messy start. The Centre must keep its mind open on pushing forward the rollout by a month or so, while industry should rise above heckling over rates and invest more lobbying energy on bigger worries, such as the GST’s penal anti-profiteering clauses.
Comments
Post a Comment