GST Council Meet in Srinagar to Fix Rates on Goods, Services

The Tax Payers that 1.3 billion Indians will spend on buying salt to luxury cars and on services like phone calls to dining out will be decided at the GST Council meet beginning Thursday in Srinagar, where a tight security cover has been thrown given recent protests. Earlier,  the Lok Sabha passed the four GST bills after Finance Minister Arun Jaitley allayed fears of a price spike in the new indirect tax regime.

Srinagar has been preferred as the venue for this crucial GST Council meeting, which will have in attendance Union finance minister Arun Jaitley. His ministry leaders as well as representatives of 29 states and union territories, to send out possibly a message to the people of Jammu and Kashmir on the significance it holds for the country.

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The Council covering the next two days will fit most of goods and services in either 5, 12, 18 or 28 percent tax bracket. Rates thus fixed will be required from July 1, the scheduled date for the Rollout of Goods and Services Tax (GST) India’s largest tax overhaul since independence.

Around 1,000 defense personnel will be pressed into service for sanitizing the conference venue and the hotels the officials will be staying.

The GST will be a public sales tax that will be levied on consumption of goods or use of services. It will restore 16 current levies seven central taxes like excise duty and service tax and nine state taxes like VAT and entertainment tax thereby creating India as one market with one tax rate. Jaitley had earlier this month revealed confidence of the GST Council arriving at tax rates in the May 18-19 meeting.

Around 1,000 defense personnel will be pressed into service for sanitizing the conference venue and the hotels the officials will be staying. Another 400 men will be deployed for the safety of the representatives, state police official said. The holding of the conference in Srinagar is not just the Centre’s initiative, but many of the states too had required way back in February that the Council should meet in Jammu and Kashmir when it decides the tax rates, official sources said.

With the GST, India will connect select league of nations with a goods and service tax. France was the prime country to implement the GST in 1954. Since then Germany, Italy, the UK, South Korea, Japan, Canada and Australia have been amongst the over a dozen nations which have implemented the GST. China performed GST in 1994 while Russia did it in 1991. Saudi Arabia plans to do it in 2018.

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The Reserve Bank declared the GST a game changer and told given the cross-country practice and empirical evidence on efficiency gains from the Value Added Tax (VAT) in the Indian context. The implementation of this overall indirect tax is likely to ensure higher tax buoyancy and an advancement in government finances over the medium term. The GST is a target based single tax on the supply of goods and services from the producer to the consumer and is one indirect tax for the entire country.

Basic services which are at modern exempt from service tax would be kept out of the GST as the Capital does not want to give any shock to people in the prime year of GST rollout.

The GST Council in its early meetings had determined on a four-tier tax structure of 5, 12,18 and 28 per cent. Furthermore, for demerit and luxury goods, a cess will be rolled on top of the peak rate. The cess will be used to recompense the states for revenue loss resulting out of the GST implementation in first five years.

The fitment committee including central and state officials has worked out fitment of these taxes on different goods and services, and the report will be placed before the GST Council at its May 18-19 meeting. Tax rate which is nearest to the present incidence of tax on a good or service will be chosen with a view to keeping the shift from the current regime of excise duty plus VAT or duty tax to GST regime-neutral for consumers.

The tax rates will be determined in a fashion to keep their impact on inflation as well as incomes to the government near neutral. Officials told that basic services which are at modern exempt from service tax would be kept out of the GST as the Capital does not want to give any shock to people in the prime year of GST rollout.

Currently, there are 17 articles in the negative listing of services on which service tax is not levied. On the head of that, there are over 60 services, like a religious pilgrimage, healthcare, education, skill development, journalistic activities, which are excluded from service tax. As per estimates, the GST is expected to shore up government revenue including spur economic growth by 1-2 percentage points.

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The International Monetary Fund had earlier this year told GST could help raise India’s medium-term GDP to over 8 percent and create a single national market for enhancing an efficiency of movement of goods and services. Even the World Bank has told a smooth implementation of the GST could prove to be a significant push to economic exercise as growth could pick up to 7.2 percent in 2017-18 and further to 7.5 percent in 2018-19.

Harish Kumar

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