Economy

Area-based exemptions to industry will continue as refunds under GST

Our Bureau New Delhi | Updated on January 16, 2018 Published on September 30, 2016

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States seek review of decision on control over service tax assessees

In a major incentive to India Inc, the Centre has decided to continue with area-based excise duty exemptions provided to the North-East and hill States when the goods and services tax (GST) regime kicks in from April 1, 2017.

However, these will be provided as refunds, not as exemptions.

“It was agreed that there would be levy of tax on all exempted entities under GST. The Centre or the State that gets the tax will then reimburse it to the exempted entity,” said Finance Minister Arun Jaitley after the second meeting of the GST Council here on Friday.

Jaitley said the States will now decide on the specific industrial exemptions they wish to continue.

The exact details on whether all the exemptions will be grandfathered or refunded will be worked out, he said.

Reimbursement of taxes

The issue of reimbursement of taxes by the Centre also needs to be examined as 48 per cent of the tax from the Centre’s kitty goes to States under the devolution formula, Jaitley said.

While the Finance Minister stressed that all decisions by the Council are being taken through discussions and not by voting, States have called for a re-examination of the control over service tax assessees.

Though it was decided at the last meeting of the Council that all 11 lakh service tax assessees will be under the administration of the Centre, the States have now asked how restaurants, software contracts and deemed exports will be treated.

“The question is what happens in cases where there is taxation of both goods and services,” explained Revenue Secretary Hasmukh Adhia. Jaitley said the issue will now be examined by a group of officials and a formulation worked out.

The GST Council also approved the draft rules for returns, registration, payment and invoices. These will be notified immediately after the model GST laws are enacted. The Council, however, did not take up the pending issue for calculation of the annual increase in revenue that would be used for projecting the compensation to the States.

“It will be taken up in the next round of discussions,” said Jaitley. The GST Council will meet next on October 18-20, when the rates for the tax are on the agenda. The Minister expressed the hope that the rates and the draft GST laws would be finalised by November 22 .

Published on September 30, 2016
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