“GST Council agreed at Rs 20 lakh threshold which means any dealer who has turnover of less than Rs 20 lakh will not be part of tax net. This gives huge relief to small businesses of India and West Bengal….” - Mr. Amit Mitra, West Bengal Finance Minister

Racing against time to iron out the issues between the Centre and States for rolling out the new indirect tax regime i.e. Goods and Services Tax (“GST”) from April 1, 2017, the Central Government vide Notification S.O. 2915(E).- [F. No. 31011/09/2015-SO (ST)] dated September 10, 2016, had appointed September 12, 2016 as the appointed date for Section 12 of the Constitution (101st Amendment) Act, 2016 [GST COUNCIL PROVISIONS], following which, the Union Cabinet had approved setting up of powerful GST Council on September 12, 2016.

First meeting of the GST Council held on September 22-23, 2016. The main agenda of the first meeting was to take the contentious issue of threshold exemption amount, dual control of the Centre and States over assessees and full compensation to States for five years in the event of revenue loss due to switch-over to GST.

Now, following the agenda, the GST Council in its first meeting, headed by the Hon’ble Finance Minister of India, Mr. Arun Jaitley took certain decisions by consensus. Some of the important issues on which the Centre and States have agreed are stated hereunder for easy digest:

Threshold limit for GST fixed at Rs. 20 Lakhs

It is pertinent to note here that the Model GST Law put in public domain on June 14, 2016, has prescribed threshold of Rs. 10 Lakhs for all States other than North Eastern States including Sikkim and Rs. 9 Lakhs for North Eastern States including Sikkim, which was considered on being at a lower side.

The threshold limit for GST has now been fixed at Rs. 20 lakhs for all States except North Eastern States and hill States wherein the threshold limit will be Rs. 10 lakhs, thereby exempting traders with a turnover less than Rs. 20 lakhs/10 lakhs annually from levy of GST.

In this regard, Mr. Jaitley after the GST Council meeting has said that "The GST council meet was held in true federal spirit, (we) have received two suggestions on the threshold for exemptions,". The Finance Minister elaborated that some States wanted Rs. 10 lakhs threshold, while others proposed Rs. 25 lakhs exemption limit for applicability of the new regime. 

Dual Control

State authorities have been empowered with exclusive control over the assessees with annual turnover of less than Rs. 1.5 crore. For assesses having turnover above Rs. 1.5 crore, there will be an element of dual control and a mechanism will be worked out wherein an assessee will be assessed either by Central or State Government based on risk evaluation. Meanwhile, given the lack of expertise among the States to levy Service tax, the power for assessment of 11 lakh Service tax assessees who are currently assessed by Centre Government, would remain with the Centre and State officials after training will begin to help assess future assesses.

Base year for compensation to States

2015-16 will be the base year for calculating compensation to States for any loss of revenue arising from rollout of GST. Odisha Finance Minister, Mr. Pradeep Kumar Amat said the Central Government will compensate for five years for revenue loss and this will be discussed in the next meeting.

The next meeting of the GST Council will be held on September 30, 2016, to finalize draft rules on granting exemptions from GST including area based exemptions like exemptions to North-eastern and hill states etc. However, the GST rate and tax slabs would be decided at its three-day meeting beginning from October 17 i.e. October 17-19, 2016.

Moving on fast track to roll out the new indirect tax regime from April 1, 2017, it would be interesting to see how quickly the decisions are taken on important agendas by GST Council so as draft CGST and IGST legislations is passed by the Parliament and each State legislature passes their respective Bill in accordance with the Model GST Law.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

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Bimal Jain
Category GST   Report

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