The Goods and Services Tax (GST) Council headed by Finance Minister Arun Jaitley on Saturday cleared the crucial Central GST (CGST) and Integrated GST (IGST) bills, as the country moved a step closer towards implementing its biggest tax reform from July 1.
The GST council, in its eleventh meeting in New Delhi, approved the drafts of the central GST law (CGST) and the integrated GST (IGST) law. It will again meet on 16 March to clear the state GST law (SGST) and the union territory GST law (UTGST).
Once all the bills are passed by the council, the Union government will collectively take the bills to the Union cabinet for its approval. Subsequently, the bills will be tabled together in Parliament in the second half of the budget session.
To be sure, there are some minor changes that have been proposed in the drafts of the CGST and the IGST bills. The legal committee will make these changes and subsequently the drafts will be again circulated to the states in the next few days. The bills may then again come back to the council for its final nod.
In a press conference after the meeting, finance minister Arun Jaitley expressed hope that the implementation of GST from 1 July will be possible.
“The compensation law was approved in the last meeting. Today we have approved the CGST law and the IGST law. In the next meeting we will be approving the Union Territory GST (UTGST) and the State GST (SGST) laws, which will then complete the legislative exercise,” Jaitley said after the meeting. “It looks on track…1st July this year now optimistically looks like the possible date for the implementation of the GST.”
The IGST law, the CGST law, the UTGST law and the bill to compensate states for revenue losses arising from a transition to GST will require the approval of Parliament while the SGST law will require the nod of the state legislative assemblies.
Under GST, the states and the Centre will collect identical rates of taxes on goods and services. For instance, if 18 percent is the GST rate on a good, the states and the Centre will get 9 percent each called the CGST and SGST rates.
The Centre will also levy and collect the IGST on all inter-State supply of goods and services. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one state to another.
Two more laws – UTGST and SGST – need to be cleared by the Council, which would now meet on March 16 – while Parliament is in session – to finalise these laws, Jaitley said.
The council has agreed on a four-slab structure – 5, 12, 18 and 28 percent— along with a cess on luxury and `sin’ goods such as tobacco.
Jaitley said the model GST Law will have a clause to enable the tax levy of up to 40 percent tax (20 per cent by the Centre, as well by the states) but the effective tax rates will be kept at the previously approved four-slab structure.