GST Council Approves Law For Compensating States' Revenue Loss

Udaipur: Making some headway, the GST Council on Saturday approved a law to compensate states for any loss of revenue from implementation of the new national sales tax but deferred approval for enabling laws to next meeting.

Legal language of a half-a-dozen provisions of the Central GST (C-GST), Integrated GST (I-GST) and State GST (S-GST) laws held up approval but Finance Minister Arun Jaitley expressed hope to get them approved in the next meeting on March 4-5 so as to take them to Parliament in the second half of the Budget session next month.

Parallelly, the Council will get down to fixing rates of taxes for different goods and services by fitting them into the four approved slabs of 5, 12, 18 and 28 percent, he said.

"It will not come before the Council anymore and will be taken to the Cabinet for approval and will make efforts to pass it in the second leg of Budget session (beginning March 9)," he said.

The Finance Minister also hoped to get the C-GST and I-GST laws approved in the month-long session. S-GST law, after approval of the Council, will need to be passed by each state legislature.

"During the legal drafting of the C-GST and S-GST and I-GST laws certain contentious issues came to the fore and it was necessary to place all the issues before the Council again to take specific directions," he said.

The Council gave its suggestions to the legal sub-committee, comprising officers of the Centre and states who are drafting the model laws, on issues like composition of appeal at tribunal to adjudicate on disputes, delegation of powers and exemptions during transition phase.

Other issues included taxation of services and VAT in work contracts, composition limit and definition of agriculture.

"After incorporating these clarifications, on March 4-5 meeting in Delhi, these laws will be cleared," Jaitley said. GST, which will replace a plethora of central and state taxes, is a consumption based tax levied on sale, manufacture and consumption on goods and services at a national level.

Under it, C-GST will be levied by the Centre, S-GST by states and I-GST on inter-state supply of goods and services.

Different indirect taxes of central excise duty, central sales tax CST and service tax are to be merged with C-GST while S-GST will subsume state sales tax, VAT, luxury tax and entertainment tax.