GST Council clears law to compensate states for revenue loss

09:45 AM Feb 19, 2017 | Team Udayavani |

Udaipur: Inching towards rolling out of GST, the GST Council approved a law to compensate states for any loss of revenue from the implementation of the new national sales tax but deferred approval for enabling laws to next meeting.


The all-powerful GST Council will meet again on March 4 and 5 to approve the legally vetted draft of the supporting legislations for Central GST (C-GST) and Integrated GST (I- GST), days before the start of the second leg of the Budget Session where the Centre is hoping to get them approved.

It will also approve the State GST (S-GST) law, Finance Minister Arun Jaitley said after the day-long meeting. After laws are approved, 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 per cent, he 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, SGST 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.


There was expectation that the GST Council will approve the C-GST, S-GST and I-GST laws to enable the new indirect tax regime to roll out from July 1 but while there was a broad agreement, legal language of some clauses held up the approval, he said.

Officials said while an array of 53 clauses have been approved, only seven items.Jaitley said the GST Council approved the Compensation Law that will legally provide for the Centre making up for any loss of revenue to states in first five years of rollout of Goods and Service Tax (GST) regime.

This law will go to Parliament for approval in the second half of the Budget session beginning March 9, Jaitley said, hoping the other supporting legislations of C-GST and I-GST too can be taken up in the month-long session.

S-GST will have to be approved by each of the state legislative assemblies. The GST Council, headed by Jaitley and comprising of representatives of all states, held its first of the 10 meetings so far outside the national capital.

He said the critical anti-profiteering clause in the draft law to ensure that the benefit of lower taxes gets shared with consumers was not discussed in today’s meeting.

Kerala Finance Minister Thomas Isaac said most of the time of the Council was spent over administration of powers over assessees between Centre and the state as the central bureaucracy was feeling left out and wanted a greater share.

Officials said only minor legal vetting of the draft laws is left which after getting the language legally right will be circulated to states by March 1. Also, a separate UT-GST law, on lines of S-GST, needs to be enacted for Union Territories.

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