Two crucial bills get GST council nod

New Delhi: The proposed rollout of India’s biggest tax reform — the Goods and Services Tax (GST) — possibly from July got another boost on Thursday after the Centre and states approved the remaining two crucial supplementary bills.

The GST Council, headed by finance minister Arun Jaitley, gave its nod to the State GST (SGST) and the Union Territory GST (UTGST) bills paving the way for bringing in Parliament and state Assembly the final legislations on the new indirect taxation regime.

With this, all five enabling draft bills stand approved by the GST Council. The council has already cleared the Central GST (CGST) and the Integrated GST (IGST) bills and a compensation legislation. GST aims to create a unified national market by replacing a string of local levies with a single tax.

The GST Council also approved the maximum cess which could be imposed on luxury cars, tobacco, aerated drinks and pan masala among others to raise money to compensate states for loss of revenue when the new tax is rolled out.  However, the actual cess imposed on these commodities is likely to be less as the GST Council kept headroom for itself for future exigencies by proposing higher caps.  

The cess would be imposed over and above the peak GST rate of 28 per cent.  

As per the approval, the maximum cess on luxury cars and aerated drinks will be 15 per cent and on pan masala 135 per cent ad valorem. Tobacco cess will be capped at a mixture of Rs 4,170 per 1,000 sticks or ad valorem of 290 per cent or a combination of both. Cess on coal would be at Rs 400 per ton. No decision has been taken to levy cess on bidis as of now. The GST Council has kept the option open for levy of 15 per cent cess on “all other supplies”

“If a luxury car at present commands a total tax of 40 per cent, under the new indirect tax regime, a GST of 28 per cent plus 12 per cent cess would be levied to keep the tax incidence at the same level. The cap is a ceiling, so we have kept a little headspace... Not an extraordinary headspace, but only a marginal headspace,” said Mr Jaitley.

All the bills will now need to be approved by the Union Cabinet, and after which they will be brought in Parliament.  “We will try and do that expeditiously,” said Mr Jaitley. The State GST will need to be approved by each state Cabinet and then passed by the respective state Assemblies.

Now among the pending agenda for the GST Council is to approve four rules — composition, valuation, input tax credit and transitions. For this the next meeting of the GST Council has been called on March 31.

However, government officials indicated that GST legislations could be passed without approval of these rules, as they will come into effect after laws are passed.

After that, in April, the GST Council will decide which commodity and service will be taxed at what rate.