New Delhi: The Goods and Services Tax Council on Saturday approved the final draft of the Central GST (C-GST) and Integrated GST (I-GST) legislation, and will take up for approval State-GST and Union Territory-GST (UT-GST) bills at its next meeting on March 16. With this, the new tax regime appears to be all set for rollout from July 1.
The C-GST, that will give powers to Centre to levy GST on goods and services after Union levies like excise and service tax are subsumed, and I-GST, which will be levied on inter-state supplies, will go to Parliament for approval in the second half of the Budget Session that starts March 9, finance minister Arun Jaitley said after the meeting of the council.
The GST Council also fixed a five per cent tax rate on small hotels and restaurants and approved the draft of key supporting legislation to enable the rollout of the new indirect tax regime from July 1.
The S-GST, which will allow states to levy the tax after VAT and other state levies are subsumed in GST, will have to be passed by each of the state Assemblies. The UT-GST will also go to Parliament for approval.
Mr Jaitley said the model GST law will have a clause to enable levy of up to 40 per cent tax (20 per cent by the Centre and an equal amount by states), but the effective tax rates will be kept at the previously approved levels of 5, 12, 18 and 28 per cent.
“The rates will be what has been decided by the council. There won’t be a higher rate of taxation. But the cap rate in the legislation is always put at a higher level to leave a headspace, just as in the Customs Act you have a difference between the bound rate and applied rate. So the applied rate is going to be what the council has decided,” the finance minister said.
This is done to obviate the need to go to Parliament in case the levy has to be raised on certain goods and services. This will also help in a scenario where the cess on demerit goods being proposed to compensate states for loss of revenue from GST is to be merged with the tax rate itself, he told reporters after the meeting.
“It looks like it’s on track. Hopefully the laws would be before Parliament this session and subject to Parliament approving them, July 1 this year now optimistically looks like the possible date for GST implementation,” he said.
The council, headed by Mr Jaitley and which comprises the representatives of all states, decided to levy a five per cent GST rate (2.5 per cent by Centre and 2.5 per cent by states) on small hotels, restaurants and dhabas with an annual turnover of up to Rs 50 lakhs.
Revenue secretary Hasmukh Adhia said there were some demands that restaurants be included in the composition scheme, particularly those with less turnover. “So the council decided there would be a composition scheme for restaurants up to a turnover of Rs 50 lakhs, and the rate for them is five per cent. The remaining restaurants will come into the regular service tax rate.”
