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GST Council Meet; Threshold Fixed at Rs. 20 Lakhs
Sep 28, 2016

The conclusion of the first meeting of the GST Council held recently in New Delhi, marked consensus on three important issues of exemption limit, dual control and base year for compensation to states. The GST Council, headed by finance minister Arun Jaitely, decided to fix the exemption limit for the indirect tax at Rs 10 lakh for North-eastern states and smaller states and Rs 20 lakh for other states along with decision to subsume all cesses into GST.

Key Points

  • There will be a total of eleven states, including Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, for which the turnover exemption limit will be Rs 10 lakh.
  • The council made headway on the contentious issue of dual control between states and Centre by allowing states to have administrative control over assessees with annual turnover of less than Rs 1.5 crore.
  • For turnover of over Rs 1.5 crore there will be jurisdictional assessment by either states or Centre but no dual control.
  • There will be status quo for assessment of 11 lakh service tax assessees, with the powers continuing to stay with the Centre.
  • Government officials will be trained in due course to handle the service tax cases, but till then the Centre will have exclusive jurisdictional control.
  • New assessees which would be added to the list would be divided between the Centre and states.
  • There will be cross empowerment between states and Centre leading to single interface and there will be an audit of only around 5 per cent cases under GST.
  • Which assessee is assessed by whom will be decided on the basis of a formulation mainly the risk assessment by the Centre and state, and which of two authorities has a higher risk assessment will assess it. How the control will change officers will assess it.
  • The council will meet later from October 17-19 to decide on the crucial rate structure for GST.
  • On compensating states for any potential revenue loss, the GST Council was of the view that the compensation should be paid at regular intervals, either quarterly or bi-monthly.

There have been 3-4 suggestions for deciding the compensation formula including suggestion to have a fixed rate for revenue growth. It was also suggested to take an average of revenue growth for three out of last five years, excluding two outliers along with suggestion to fix a base year and a specific growth rate for all states so that if the revenue falls short of that, then the state gets compensated.

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