Michaela Merz

PwC India Indirect Tax News Flash – Seventh and Eighth meetings of the GST Council

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indien_dieter-schutz_pixelio-deSignificant progress has been made on the Goods and Services Tax (GST) front in the last two meetings of the GST Council (held on 22 and 23 December 2016, and 03 and 04 January 2017).

The draft Central GST, State GST and Integrated GST laws have been mostly finalised (except a few open areas) and have been sent to the Ministry of Law for review. Once the same are vetted legally, the laws would be placed before the GST Council for formal approval. A ‘rates committee’ has also been formed, which would be working concurrently to finalise the rate schedule, and the same would be considered by the Council.

As per reports, consensus has also been reached on the issue of the compensation to states, and the basic draft of the compensation law has also been approved by the GST Council. The Council had also discussed the list of goods to be covered for levy of cess, and other sources to fund the compensation for the states.

However, a few open points of consideration are still pending for agreement, which would be discussed in the next meeting of the GST Council on 16 January 2017. These include:

  • Dual control / cross empowerment – Though no consensus has been reached on the much-debated issue on the administrative split, the Finance Minister highlighted that majority of the states had a positive attitude on the issue during the meeting. As per reports, the states continue to insist for complete control over businesses having an annual turnover below 1.5 crore. The issue is expected to be discussed in the next meeting.
  • Issue of jurisdictional power of states on territorial waters (12 nautical miles) – Another issue which has arisen is the definition of ‘state’, and the power to levy taxes on supplies made from territorial waters. The state governments are of the view that the power to levy taxes on such transactions is with them, while the centre is of the view that such power lies with the union. There is ongoing litigation on the matter in the current regime. The matter is pending before the Supreme Court as well. Since the issue involves interpretation of the Constitution of India on powers of the state and centre, the matter has been referred to the Ministry of Law for legal interpretation, and would be discussed in the next meeting.

In the meeting held on 03 January 2017, representations were made before the GST Council by various sectors (such as telecom, IT, banking, aviation etc) as well as by certain Ministries (such as Ministry of Commerce and Industry) on various key issues pertaining to such sectors. Demand for centralised registration for few sectors came up prominently in these representations.

PwC Comments
While the last two meetings of the GST Council remained inconclusive on the issue of dual control, significant progress has been made on the finalisation of the GST laws. Once the open points are concluded, and the laws are vetted by the Ministry of Law, the same would be passed by the GST Council and put up before the Parliament/ state legislatures.

Though a few roadblocks still remain, the road towards GST is seemingly going in the right direction. Industry now expects a formal announcement of the date of implementation of GST, as 01 April, 2017 looks increasingly difficult.

Even if GST gets delayed by few months, the quantum of changes mean that industry will continue its preparations for being GST-ready. In any case, in view of the constitutional amendments carried out in September last year, GST has to necessarily be implemented by mid-September 2017, unless the Constitution is amended again.

 

If you have any questions please do not hesitate to contact Pratik Jain, Leader and Partner Indirect Tax Team India on +91 0124 330 6507 or pratik.p.jain@in.pwc.com.

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