GST Rates Not Decided

Draft GST Bills to States for Comments without Rate Schedule

The Centre has circulated the draft goods and services tax (GST) Bills with the states, but it does not contain the four-slab rates agreed to by the GST Council earlier. The Union government has also circulated the draft compensation Bill with states.

The Central GST and Integrated GST Bills may be sent to Parliament only in late November or early December in the ongoing session in the form of money Bills, a move that may draw flak from the Opposition.

The GST Council, a body having representation from the Centre and states, will discuss these Bills on November 24 and 25. The GST is now caught in the flak over demonetization.

While the Centre and the states have already decided on four-tier GST rates – five%, 12%, 18% and 28% – these rates did not find mention in the GST Bills, sources said.

The Centre will have to clear CGST, IGST and compensation Bills in Parliament and states SGST Bill in their respective assemblies before GST could be rolled out from April 1, 2017.

States will be given seven days to suggest changes or improvement to the draft laws for GST, after which these will be taken up by the GST Council, sources said.

The Centre is likely to introduce the CGST and IGST Bills in the second half of the winter session – November-end or early-December. With the Opposition attacking the ruling dispensation in Parliament over the demonetisation issue, the government is unlikely to bring three Bills related to GST in the coming days.

CGST and IGST Bills are likely to be money Bills, a source in the Parliamentary Affairs Ministry said. This might draw criticism from the Opposition, which wants it to be tabled as finance Bill because the Rajya Sabha, where they have an upper hand, does not have the power to shoot down money Bills.

The GST Compensation Bill will provide legal backing to the Centre’s promise to compensate states if their revenue growth rate falls below 14% in the first five years of the GST rollout. The base year for calculating the revenue of a state has been decided as 2015-16.

The compensation law would have the taxes subsumed and the revenue forgone by each state on account of GST rollout.

It will give the details on how the Centre plans to raise funds for compensating the revenue loss. The Centre and states had earlier agreed on around 28% tax on high-end cars, tobacco, pan masala and aerated drinks to compensate states. Also, clean energy cess would not be subsumed into GST and would be used for funding compensation. Once the requirement of compensation is over in five years of the GST rollout, these cesses would cease to exist.

The Bill would also specify how much revenue is being raised from which item by way of levy of cess and also the way it is reimbursed to the states, leaving no room for ambiguity.

It would also specify at the end of five years if there is a surplus in the cess pool and in what proportion it should be allocated between the Centre and states.