A special provision has been made in the Constitution Amendment Bill for the introduction of Goods and Services Tax (GST) allowing some States a grace period of up to one year to join the regime, which will be introduced from April 1, 2016. In an interview with BusinessLine , Revenue Secretary Shaktikanta Das elaborates on this provision, along with other elements in the proposed tax regime. Edited excerpts:

Clause 20 of the 122{+n}{+d} Constitution Amendment Bill says, ‘Notwithstanding anything in the Act, any provision of any law relating to tax on goods and services or both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.” What does this imply?

It means that for the States, this article will apply in cases or will enable States to continue with VAT for a period of one year. So, this facility of concurrent taxation means that after GST comes in, a State can continue to levy VAT for one year.

Beyond that, this facility is not available and States will have to join the GST.

This (provision) is only for dealing with the transitory situation. It is possible that some State or States, may not be fully prepared on Day 1. Their IT backbone may not be ready or they may face some procedural issues or local difficulties. This only means that instead of joining on April 1, such States can join after two-three months or after six months, but not later than one year from April 1, 2016.

In such a situation, is it correct to say that VAT will be imposed, not GST?

This only means that the existing VAT law will continue to operate for a period of one year. After that, it goes.

Now that the Constitution Amendment Bill has been introduced, what is the next course of legislative action?

The Constitutional Amendment will have to be passed by two-thirds in Parliament. After that, it needs to be ratified by 50 per cent of the States. Thereafter, Parliament will enact the Central GST law and the Integrated GST law, and the State legislatures will have to enact their respective GST laws. Simultaneously, the framing of rules will continue.

How much time will it take to frame rules related to the GST rates as well as fix the threshold limit?

All tax rates, exemption and threshold limits will be decided by the GST Council. Let me put it in this way, taking April 1, 2016 as the likely date of implementation, we have to work backwards.

So, all other activities that you have mentioned will have to be completed, keeping that date in mind. So, these issues will have to be decided well before that. Now, whether that means three months or six months, I cannot say. But keeping April 1 in mind, this will be done.

There have been issues on fixing the threshold limit (the GST will be imposed only when annual turnover of a business unit exceeds such a ceiling). The Centre does not agree with the States’ decision to keep the limit at ₹10 lakh. What is the current situation?

It is not a question of the Centre agreeing or not agreeing. The Empowered Committee, where the Centre is also represented, had earlier decided that the threshold limit would be ₹25 lakh. Subsequently, one or two States came out with a suggestion that it should be ₹10 lakh. That issue has not been finally decided. You see, a ₹10 lakh turnover will mean two things — ₹10 lakh divided by 365 days will mean a per day turnover of that particular trader or dealer at ₹2,700 gross.

A gross daily turnover of ₹2,700 means every small tea shop owner, vegetable vendor or corner shop will come under GST’s purview. Is that the intention of GST?

If you bring the threshold down to ₹10 lakh or, in other words, if you keep the limit at ₹25 lakh, nearly 60 per cent of traders, who are very small, will be excluded and will not have any compliance burden.

If you reduce it to ₹10 lakh, too many small traders will be included and the energy and administrative focus will get thinly spread, defeating the purpose. So, a Rs 25 lakh turnover is trader-friendly, will ensure better administration, more focused attention on the big traders, which is the intention.

Being a demerit good, the Government imposes higher duty on tobacco not just to get more revenue but also to discourage consumption. Once it becomes part of GST, will the rate come down?

I can’t really comment on that because the GST council, chaired by the Finance Minister, will decide on this matter.

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