The government on Wednesday announced the setting up of two committees to facilitate the implementation of the goods and services tax from 1 April and to propose tax rates.
The government has tasked chief economic adviser Arvind Subramanian with the difficult task of coming up with a revenue neutral rate or a rate at which there will be no revenue losses to states under the goods and services tax regime.
This committee will recommend possible tax rates under GST that would be consistent with the present level of revenue collection of Centre and states, taking into account expected levels of growth in the economy, different levels of compliance and broadening of tax base under GST, the government said in a statement. This committee will also analyze the sector-wise and state-wise impact of GST on the economy.
A previous proposed rate of 27% recommended by a sub-committee of state and central government officials was considered unacceptable and as too high by the government.
Finance minister Arun Jaitley had hinted that the new rate will be much lower.
“Neither the state finance ministers nor the central government are interested in imposing higher taxes on our own people. Therefore, this figure is going to be much more diluted. These are rates that will be decided by the GST council itself,” he had said at the time of the passage of the 122nd constitution amendment bill in the Lok Sabha.
The committee is expected to give its report within two months.
The government has also set up a steering committee having representation from the central board of excise and customs (CBEC), states and the goods and services tax network (GSTN)-the company tasked with setting up the information technology (IT) network for GST.
“This Committee shall monitor the progress of IT preparedness of GSTN/CBEC/tax authorities, finalisation of reports of all the sub-committees constituted on different aspects relating to the mechanics of GST and drafting of CGST (central GST), IGST (integrated GST-CGST+SGST) and SGST (state GST) laws/rules. The Committee shall also monitor the progress on consultations with various stakeholders like trade and industry and training of officers,” the statement said.
The government is eagerly awaiting the passage of the constitution amendment bill in Rajya Sabha. Once the upper house clears it, the bill will have to be ratified by 50% of the state assemblies. Following this, the government will set up the GST council having the union finance minister and the state finance ministers as members. This council will decide on the crucial issue of the final design of GST, including the revenue neutral rate and the threshold level or the revenue level beyond which GST will be levied on traders.