As the first day of council meeting
concluded on Tuesday, the GST council managed to arrive at a
consensus on how to compensate the state for losses they incur on
account of tax reform that subsume various state and central
However, Council has not yet arrived
at a conclusion on the crucial GST rate structure. As per Finance
Minster Arun Jatiley, the proposal for four tier structure was
Rate structure under GST:
The Basic structure:
The center proposes four-slab GST tax structure:
Standard 1 Rate
Standard 2 rate
However, there is also proposal to impose an additional cess.
Food item will continue to exempt
from tax. As much as 50% of the common use goods will either be in
the exempt category or lower band.
Also, 70 percent of the items is
proposed to be governed by 18 percent of lower GST rate. However,
ultra-luxury items such as high-end cars and demerit goods like
tobacco, cigarettes, aerated drinks, luxury car and polluting items
would attract an additional cess on top of the 26 percent GST
On gold, the GST rate suggested was 4
percent. FMCG and consumer durable products would attract 26
percent GST rate, against the current incidence of around 31
Taxation of services would, however,
be only in the 6 percent, 12 percent and 18 percent range, with the
higher rate being 18 percent.
Virtues of the proposed structure:
The overall impact on the consumer
price index is likely to be (-)0.6%.
Estimate of inflation impact on
health services is 0.56 percent, fuel and lighting 0.05 percent and
clothing 0.23 percent, transport (-)0.65 percent, education (-)0.08
percent and housing (-)0.09 percent. It also says the Centre's
estimated revenue collection is Rs 8.72 lakh crore as per this
The proposal to impose a cess will
help create a fund of Rs 50,000 crore, which can be used to
compensate the states.
GST council is moving ultra-fast towards the timely
implementation of GST from 1st April 2017. GST council also
finalized the compensation formula for states for calculating
compensation for states in the first five year of implementation.
With this speed of GST council, April 2017 is a doable target.
Government has proposed a slab rate structure under GST, it would
also increase the revenue of government in comparison to current
tax scenario of indirect taxation, which is still under discussion
in GST Council.
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In December 2015, the Central Board of Direct Taxes (CBDT) issued draft guidelines for determination of 'Place of Effective Management' (POEM) of a foreign company (Draft Guidelines) and had invited comments and suggestions from the stakeholders.
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