The Goods and Services Tax (GST) Council with the Union Finance Minister as its chair was approved on Monday, with powers to recommend the indirect tax rate, establish a disputes redressal mechanism, among other matters.
According to a report in Times of India, the Centre is most likely to back a standard GST rate of 18-19 per cent. However, states like Kerala are of the view that the levy should be upwards of 20 per cent to ensure that state revenue collections are not impacted when the GST comes into effect from April next year.
Building consensus will be top on the agenda when the GST Council will hold its first meeting on September 22 and 23. Analysts say that implementing the tax by the targeted deadline will deepen upon the Council’s ability to build an agreement on the issue.
The TOI report, citing sources, mentioned that the rate will be beneficial only if tax rate is less than 18 per cent and that the poor men don’t get affected by it.
"We need to ensure that the basket that makes up the consumer price index is not affected. The message is clear that gareeb ki thali (poor man's plate) should not get expensive. The CPI (consumer price index) basket will not be impacted. There is commonality of focus (between the Centre and states) on this," it quoted a source as saying.
It is worth mentioning that a panel headed by Chief Economic Adviser Arvind Subramanian too had recently suggested a standard GST rate of 17-18 per cent.
Apart from recommending the tax rate and the mechanism to resolve disputes, the Council will also make suggestions in areas such as goods and services that may be exempted, model laws and rules on the subject, special rates during adversities and special provisions for some states.
The GST is a pan-India indirect tax that proposes to subsume most central and state taxes such as value added tax, service tax, central sales tax, excise duty, additional customs duty and special additional customs duty, into one tax.
While most states have come on board, the report said, states like Tamil Nadu, West Bengal and Kerala are of the view that the proposed tax regime is against their interest.
Government officials, however, said states did not have a choice but to be part of the GST regime as the Constitution now mandates the levy.
The government intends to implement the new pan-India indirect tax regime from April 1, 2017.