GST Council meet starts in Srinagar

SRINAGAR: The apparently penultimate sessions of the GST Council has started in the SKICC, on the banks of Dal lake. Finance Ministers of all the states of India including a few deputy Chief Ministers’ have flown to attend the conclave that will decide the tariffs for various items amid polar differences on gold, handicrafts, bedi and a few small items.

The meeting is being presided over by the Finance Minister Arun Jaitely who arrived here Wednesday afternoon. Soon after his arrival he took review of the security situation as Defence Minister of India.

The visiting ministers and their staff which is a 140-member group is giving a series of interactions. They are being hosted at dinner by the Chief Minister Ms Mehbooba Mufti Thursday evening. A huge number of media persons have also landed to cover the event and the deliberations which are crucial to the general masses across India. Some TV Crews have slated discussions in the neighbouring Royal Springs Golf Course to capture the essence of the place and the policy.

After the meeting is over, the ministers would be driven to Gulmarg for a guided tour. “This is aimed at sending a message outside that Kashmir is safe as it always was for a tourist,” the sources said. “They have moved around since Wednesday when they landed here.”

The meeting is slated to decide fitment of various goods and services in the multi-tier tax structure of 5, 12, 18, 28 per cent, with additional cess over and above 28 per cent for demerit and luxury goods. In anticipation of the meeting, a technical committee of officials met on Wednesday to evolve a broad consensus on the fitment of the items in the tax slabs. Tax slabs have been decided for about 80 per cent of items but there are certain contentious issues.

Services are likely to be placed in two slabs of 12 per cent and 18 per cent, with a likely status quo for currently exempted services. Currently, there are 17 items in the negative list of services on which service tax is not levied. On top of that there are over 60 services, like religious pilgrimage, healthcare, education, skill development, journalistic activities, which are exempt from service tax.

Jaitley earlier indicated that tax rates for most items will be much closer to their existing tax incidence.

Indications suggest the government will impose a cess on luxury and other goods with a cap of 15 per cent. The maximum cess on pan masala has been capped at 135 per cent and for tobacco it is capped at 290 per cent or Rs 4,170 per 1000 sticks. The environment cess has been capped at Rs 400 per tonne.

Wazwaan and Shirmal

While the host state has made elaborate arrangements to showcase various foods of the state, it is the wazwaan that is dominating. Sources said two-third of the visiting ministers are mutton eaters. “We have made arrangements for vegetarian Wazwaan as well,” one official associated with the exercise said.

Politicising the venue

“Against a backdrop of protests often marked by stone-pelting, the Srinagar summer is cool and bracing,” Time of India reported. “The calm may be deceptive but senior PDP members urge that Kashmir’s reality is “many layered”, and not defined by street violence alone.”

Reports that Srinagar was selected as the venue of the vital meeting was aimed at send a message is being doubted by the top functionaries of the state government. They said the meeting in Srinagar was scheduled as early as February.

GST, What?

GST is a destination-based single tax on the supply of goods and services from the manufacturer to the consumer and is one indirect tax for the entire country. It has evolved in France in 1954 following which it was adopted by Germany, Italy, the UK, South Korea, Japan, Canada and Australia have been among the over a dozen nations which have implemented the GST. China implemented GST in 1994 while Russia did it in 1991. Saudi Arabia plans to do it in 2018.

GST Council has agreed to subsume several taxes, including central excise, state VAT, service tax, central sales tax and octroi, it has kept around a third of state revenues outside the GST ambit.  Alcohol, petroleum and real estate are three items on which GST will not be levied.

RBI has termed GST as a “game changer” insisting its implementation will ensure higher tax buoyancy and an improvement in government finances over the medium term.

The host state issues

Interestingly, while J&K playing an important part in the evolution of the new tax system deliberations, it is currently not joining the new regime directly. Given its special status, J&K is legislating on the issue and adopting a state GST law later this year.

With the flexibility of having its own law, it may experiment with certain improvements. What is being loudly thought is that it may include the real estate into the ambit of GST.

J&K Finance Minister Dr Haseeb Drabu foresees J&K being benefited by the GST takeover. Being one of the major consumer markets in the region, he foresees J&K tax kitty appreciating by no less than Rs 2000 crore. J&K’s own income is Rs 11000 crore with tax forming the major component.

“We were the first to do many things and we may be the first to include real estate,” Drabu was quoted by Times of India, saying. “J&K has moved to a January-December financial year, was first to abolish the distinction between plan and non-plan spending and is now working on rolling out universal basic income, something that has been discussed in the latest Economic Survey.”

Drabu told the newspaper that J&K government is enacting laws that would allow for levy of integrated GST, central GST and state GST amid indications that audit powers may not be split between the Centre and the state in the same way as it is done in the rest of the country.


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