GST Council meets today, action packed days ahead
Ranjeet Mahtani & Sweta Rajan
All eyes and ears are on the GST Council's meeting this weekend. At the time of stop press, the update is that the GST Council has reached a consensus on the CGST and IGST bills, but the State GST bill could not be discussed - it emerges that some amendments by the Law Department are yet to be incorporated. These agreed bills will be taken up later this month by the Parliament, and the GST Council will have a further meeting on March 16th. Ahead of the GST Council’s meetings today, March 4th and tomorrow, a limited indication of some of its proposals to the provisions of the GST laws has been provided.
Peak rate at 40%
One such indication is that the GST Council will in the laws insert a provision to set the peak rate of GST at 40% (i.e. 20% CGST + 20% SGST) instead of 28% (i.e. 14% CGST + 14% SGST).
Further, the 4-slab rate structure of 5%, 12%, 18% and 28% that was agreed on last year will not be disturbed by this increase in the peak rate. The justification for this proposal is to address future contingencies and to build into the model GST laws the option for the Council to increase the rate of GST up to 40% without approaching the Parliament.
No centralised registration for services
The GST Council has indicated that service providers may not have the benefit of a single centralised registration system. Under the present service tax law, service providers have the option to obtain a single centralised registration for paying service tax (which is levied and collected by the Central government only). Under the impending GST regime, States will also have the power to levy tax on services. As a result, service providers would have to obtain registrations in all States where services are provided (in terms of the Place of Supply Rules).
Various service industries such as telecom, insurance, aviation, logistics, IT and IT-enabled services have highlighted the compliance and procedural hassles of decentralised registration of service providers to the Government. The association representing the central Indian revenue service officers had also stated that the service sectors which presently operate under a single centralised service tax registration file three service tax returns in one year; however, in the GST regime, they will have to file 61 returns per state, per year, after taking registration in each state in which they have presence. It was further emphasised that a decentralised system of compliance and regulation for services may detrimentally affect export competitiveness since overseas clients may be uncomfortable with the presentation of multiple invoices for the same service. Despite these representations, the States (who have a 2/3rd vote share in the GST Council) do not seem inclined to allow a centralised registration system for services.
GST from July 1, 2017?
Earlier this week, the Economic Affairs Secretary Shaktikanta Das (at a platform involving the OECD) said that both the Centre and State governments are working towards implementing GST by July 1, 2017. The GSTN CEO has also reaffirmed preparedness to go live by that date.
Yet, there are various steps required to be completed for the implementation of GST, including the approval of the GST laws by the GST Council (which one hopes will be achieved before this week ends), passage of the GST laws in the Parliament, classification of all goods and services across the various tax rate slabs, enacting of the laws by the States, complete migration or enrolment of tax-payers, etc. On the other hand, India Inc. also has to modify and transition its systems, educate its personnel and vendors, etc.
The challenge to make India a unified market will witness action-packed days ahead, and those not already on this juggernaut must quickly make amends.