Good news: Contentious GST issues get resolved

K Srinivasan
K SrinivasanFeb 19, 2017 | 19:26

Good news: Contentious GST issues get resolved

The Goods and Services Tax Council’s (GSTC) tenth meeting took place in Rajasthan’s lake city, Udaipur, on Saturday, February 18.

In a bid to roll out the GST by the scheduled date, July 1, which has been achieved at long last, the final draft of the Bill meant for providing states compensation for possible loss due to introduction of national sales tax, was approved by the finance minister Arun Jaitley-led council on Saturday.


The council has put off draft laws of C-GST, I-GST and S-GST for approval in its forthcoming meeting on March 4 and 5 in New Delhi. In fact, it was eagerly expected that all four bills would be passed during Saturday's meeting itself.

The council, however, cleared the draft of the anti-profiteering clause of the model GST law, which is the machinery provision for ensuring the passing on of the benefit of lower taxes each time tax is reduced by the government.

Former PM Manmohan Singh’s entreaties over the same issue, of passing on the benefit to consumers, had earlier fallen on deaf ears, hence this statutory arrangement this time.

Speaking to reporters after the meeting, Jaitley said all 57 issues raised so far had been resolved and he added that the endeavour of the government would be to table the supporting legislations first before the cabinet committee and then before Parliament in the second half of the Budget session, beginning March 9.

However, the S-GST law will go before the respective state legislatures before its passage there, in tandem with the passage of the above three laws in Parliament.

Earlier, the law ministry had sent the approved draft of the Model GST Law (MGL) outlining the new national value added tax to be levied on goods and services across the country, starting from July 1.

The legal drafting of C-GST, I-GST and S-GST Bills has thrown up challenges. 

The legal drafting of C-GST, I-GST and S-GST Bills has thrown up challenges relating to constitution and eligibility of members of the GST appeal tribunal at the state and national level, exemptions to be extended during the transition time and delegation of powers under GST for cross-empowerment.

The other challenges include the treatment of works contract - whether as deemed sale of goods or still as service, keeping in view that Article 366(29A) of the Constitution is still in force; definition of agriculture and the fine print of the composition scheme with some relaxation of requirements.

The council has given its opinion on all these issues with a view to writing them into the model laws. The last task waiting to be done after the council clears these bills will be to fit goods and services into various tax brackets/baskets to serve as a sound unified tax scheme across the country, to integrate the economy into one nation and one market, and in some sense one rate also within certain limits.

This, he said, will require one more sitting of the council to give its approval to the specific items in each slot.


MS Mani, senior director at Deloitte, said it is now necessary to bring more focus on the outcome of the rate fixation exercise as businesses can plan only if rates are known, and without knowing what rates are going to be applied to specific goods and services, it will be very difficult for the industry to move forward with GST preparations.

Finally, coming to the accountability aspect, there was talk that even as indirect taxes of the Centre and states were under the auditing purview of Comptroller and Auditor General of India (CAG), if GST is also placed under the ambit, Jaitley has decided against giving powers specifically with respect to indirect tax.

This is because CAG is already empowered under the CAG Act to audit the records/information relating to public finances under taxation laws like the Income Tax Act.

The FM had ended his press report on the above matter with the clincher that the present direct tax law, that is the Income Tax Act, has not given any separate powers to the CAG. So why should there be separate powers under the new indirect tax alone? he asked.

But the point is that under the existing indirect tax laws of excise, service tax and perhaps even under state VAT laws, there appear to be powers given in the respective Acts to the CAG.

Andhra Pradesh finance minister Yanamala Ramakrishnadu said that taking the territorial waters as the territory of the Union of India and to delegate powers to states to collect tax is not the correct approach being followed in drafting of the relevant provisions of the law.

To the contrary, it would be appropriate to draft the law to treat the territorial waters as the territory of states not just to collect tax but to levy, collect and appropriate tax to states, especially since the high court has decided in favour of the states. It is once again worthwhile to point out here that the appeal in the above matter is pending before the Supreme Court.

Jaitley had agreed to refer the matter to the law committee of GSTC to examine the merits.

It looks highly probable now that GST laws are ready to be put before the GSTC in the next meeting and thereafter, before Parliament in the second half of the Budget session. There is nothing more to come which is unresolved now, at last in terms of the legislation, said Pratik Jain, Partner and leader at PwC.

Let us sincerely hope we are through with the GST legislations and the other attendant issues discussed so far.

Last updated: February 19, 2017 | 19:26
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