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In a major breakthrough that paves the way for the rollout of the Goods and Services Tax (GST) from April 1, 2017, the Centre and the States on Friday agreed to set an annual turnover limit for exemption from GST at ₹20 lakh, and reached a broad consensus on issues relating to dual control as well as compensation.
Concluding the first meeting of the GST Council, Finance Minister Arun Jaitley said, “The threshold for the levy of GST has been set at ₹20 lakh, except the hill and North-Eastern States — where it will be ₹10 lakh.”
Compensation formulaWhile the compensation formula based on revenue projections will be worked out by the officers and then finalised by the Council, Jaitley said the compensation from the Centre would cover all the cesses levied.
He added that the Centre has three options to project revenue growth: a fixed rate; going by the best three growth rates from the last five years; or excluding two “outlier” years.
States have indicated that the compensation for any loss from the GST rollout should be paid at regular quarterly or bi-monthly intervals.
The base year for calculating the compensation will be 2015-16. Accepting a key demand of the States, the GST Council agreed that small businesses with an annual turnover of up to ₹1.5 crore would be assessed only by State government officials.
Businesses with a turnover of over ₹1.5 crore would be under dual control, but would be assessed by either the Centre or the State at one time.
Based on risk assessment“Which assessee is assessed by whom will be decided on the basis of a formulation, mainly the risk assessment by the Centre and the State; whichever of the two authorities has a higher risk assessment will assess it,” said Jaitley.
It was also agreed at the meeting that the existing 11 lakh service tax assessees, who are currently being assessed by the Centre, will remain with it.
Future assessees will be divided between the Centre and the States. “We will take up finalisation of the draft rules and treatment of exemptions at our next meeting on September 30,” said Jaitley.
A third meeting has been scheduled for October 17, 18 and 19, and the major issue of rates and slabs for GST will be taken up then, he added.
He further said that all the decisions at the GST Council meeting were arrived at through a consensus, without the need for voting.
Revenue Secretary Hasmukh Adhia termed the first meeting of the GST Council a success.
Only 5 per cent of the cases will be audited under the GST regime, he said.
The GST Council set the date for its next meeting for September 30; it will discuss the revenue-neutral rates for the indirect tax levy in October.
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