The goods and services tax (GST) will be rolled out on 1 April, members at the first meeting of the GST council decided by consensus on Thursday.
They also charted the steps to be taken over the next few months to meet the deadline.
Not only does it dispel doubts on the ability to meet the deadline, it also sets in motion India’s biggest tax reform ever.
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Some key issues like sharing of administrative control between the centre and states and the mechanism for deciding on the compensation mechanism, law and formula for states will be taken up in the meeting on Friday—the final day of the two-day consultation.
On Thursday, the GST council agreed on a compounding scheme for small traders with revenues of up to Rs50 lakh wherein they can pay a flat tax to be decided at a future date. However, opinion was divided on what the revenue threshold under GST should be—Rs10 lakh or Rs25 lakh, with some larger states and the centre favouring the latter.
“The target also involves passage of the central GST law and the integrated GST law by Parliament and the state GST law by state assemblies in the winter session itself. We have roughly estimated that we have till 22 November to resolve all outstanding issues," finance minister Arun Jaitley said. “The issue of cross empowerment to address the issue of dual control and compensation and the draft compensation law will be discussed on Friday."
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The meeting also finalized the rules of business and conduct of the GST council. In the absence of a state finance minister, state government officials will be able to represent the state but won’t be able to vote. Issues like tax rates, the threshold level and selection of a vice-chairman have been put off for later.
Some states, including Tamil Nadu and Uttar Pradesh, sought more voting powers arguing that their size merits more than one vote per state; this was however rejected. Jaitley also agreed to the continuation of the empowered committee of state finance ministers—the representative body of states—for discussions on matters other than GST.
Kerala finance minister Thomas Isaac said that many states, including Uttar Pradesh and Kerala, will be affected if the exemption limit is raised to Rs25 lakh. “We will go with what the majority decides," he said.
On compensation, he added that the states want the amount to be decided based on the best three revenue earning years over the last five or six years, rather than just looking at the last three years’ revenues.