Union Finance Minister Arun Jaitley chairs the first meeting of the GST Council in New Delhi on Thursday (Source: PTI)

No Consensus In GST Council On Threshold Limit

On Thursday, in its first meeting, the Goods and Services Tax (GST) Council set a timetable for deciding the GST rate, although differences remained on the turnover limit for exemption from the new tax, Finance Minister Arun Jaitley said.

Jaitley said the timetable has been set keeping the April 1, 2017 deadline in mind. “The target also involves the passage of the CGST (Central GST) and the IGST (Integrated GST) laws by the Parliament and the passage of the state GST law by the state legislatures by the winter session,” he added.

Jaitley, who is also the chairman of the GST Council, told reporters that draft rules regarding GST were circulated, and the threshold for exemption and compensation norms were discussed. He added that there was time till November 22 to resolve all outstanding issues.

With regards to composition, we have finalised our proposal which has been unanimously accepted by the members. With regard to threshold for exemptions, there are two sets of suggestions which have come. We have converged to those two different views, and both officers and ministers will continue the meeting tomorrow (Friday) and thereafter, so that we are able to converge to one particular figure as far as the exemptions are concerned.
Arun Jaitley, Finance Minister

While some states demanded traders with an annual turnover of Rs 10 lakh or less be exempted from registering under GST, a large number of states, including Delhi, were in favour of the limit being fixed at Rs 25 lakh, Jaitley told reporters.

A threshold limit of Rs 25 lakh would mean businesses with an annual turnover below Rs 25 lakh will be exempt from GST.

“Most states are in favour of having a threshold limit of Rs 25 lakh and a compounding limit of Rs 50 lakh,” Haryana Finance Minister Captain Abhimanyu told BloombergQuint in an interview.

However, some states like Uttar Pradesh and North Eastern states have asked the threshold limit to be set at Rs 10 lakh, as a higher threshold limit would significantly impact their revenues.

The Model GST Law, released for discussion earlier this year, had proposed a turnover threshold of Rs 9 lakh per annum across India and Rs 4 lakh per annum in North - East states.

States like Uttar Pradesh will lose between 7-11 percent of their revenues due to a high GST exemption threshold.
Thomas Issac, Kerala Finance Minister

The GST Council, which is headed by the Finance Minister Arun Jaitley and includes representatives of all the 29 states and 2 union territories, will continue its meeting on Friday, September 23. Clarity on the base year that will be considered for compensating states for the loss of revenue after the implementation of GST will be discussed then. The GST Council will also discuss the compensation formula on Friday. The Council will also continue its discussion on the exemption limit. No mention was made on when a decision will be taken on the revenue neutral rate.

“Major decisions regarding compensation and base year for evaluating compensation to be taken tomorrow,” Thomas Issac told BloombergQuint.