The biggest tax reform of the country, Goods and Services Tax, is now a step closer to implementation with the Cabinet approving the formation of the GST Council headed by Finance Minister Arun Jaitley.
Here's is a lowdown on what is the way ahead:
What is the GST Council?
The GST Council will decide on the tax rate, will recommend the taxes to be subsumed and exempted from GST, the rates of taxation and the model Central, State and Integrated GST laws.
It is the council's responsibility to have one uniform rate of GST tax to be introduced all over India. It will also decide the threshold for levy of the tax, as well as the dispute resolution mechanism.
Apart from these, it will also decide special rates during adversities and special provisions for some states.
The government has notified 12 September as the date for setting up of the GST Council which will be completed within 60 days.
What is the structure of the Council?
The Council will be chaired by Finance Minister Arun Jaitley, and have a Minister of State for Finance. It will have state finance ministers as its members and representatives from two Union territories.
While the Centre will have one-third vote, states together will have a two-third say. To adopt a resolution, three-fourth majority would be required.
What lies ahead?
The states and the Centre have to draft the Central GST, State GST and Integrated GST laws. These laws have to be passed by Parliament and respective legislatures. The CGST and IGST will be drafted on the basis of the model GST law. The states will draft their respective State GST (SGST) laws with minor variation incorporating state-based exemptions. The IGST law would deal with inter-state movement of goods and services.
The first meeting of the GST Council will be held on September 22-23 in the national capital.
Will the law meet the 1 April deadline?
The simple answer is - can't say. One thing is for sure -- the government is pushing ahead. Revenue Secretary Hasmukh Adhia is of the opinion that the government is ahead of the time schedule on GST implementation.
"So far we are ahead of the time schedule of GST. The main thing to be done is to now call as many meetings of GST Council and sort out all issues, so that we can be ready with the draft of the GST Bill," Adhia told reporters on Monday.
"As far as administrative requirements are concerned, we are fully geared. We are monitoring IT preparedness of states, we are on track. We are all geared up for the April 1, 2017 deadline," he added.
What he is saying is true. After all, states' ratification of the law came in 23 days as against 30 days estimated.
However, arriving at the standard rate seems to be the biggest hurdle.
As Prashant Deshpande, Partner, Deloitte Haskins & Sells LLP, says: “Formation of GST Council will set in motion the formal process of GST implementation. The Council is expected to first take up the finalization of Model GST law for its recommendation to and enactment by the Parliament and State legislatures. The immediate agenda of the Council would be finalization of rate and exemptions, without a fix on which the stakeholder consensus would be difficult to achieve."
However, a report in the Times of India today says the government may back 18-19 percent rate, which is what the main opposition party Congress has been demanding. It remains to be seen whether the states, who fear revenue loss on account of subsuming of state level cesses and taxes, will agree to this.
If the Council manages to resolve this, the 1 April deadline is likely to be met.
(With inputs from agencies)