Moving a step closer towards implementation of the goods and services tax (GST) from July 1, the GST council chaired by Union finance minister Arun Jaitley approved two crucial supporting legislations of central GST (CGST) and the integrated GST (IGST) laws, for this ambitious tax reform. The council will take up for approval the State GST (SGST) and Union Territory-GST (UT-GST) laws at its next meeting on March 16. It has also decided to levy a 5 percent GST (2.5 percent by Centre and 2.5 percent by state) on small hotels, restaurants and dhabas with an annual turnover of up to Rs 50 lakh.
Finance Minister Arun Jaitley has said that the CGST, which will give powers to Centre to levy GST on goods and services after union levies like excise and service tax are subsumed, and IGST that is to be levied on inter-state supplies, will go to Parliament for approval in the second half of the Budget session beginning March 9. He further said that the SGST, which will allow states to levy the tax after VAT and other state levies are subsumed in the GST, will have to be passed by each of the state legislative assemblies and UT-GST will also go to Parliament for approval.
Jaitley also said that the model GST Law will have a clause to enable levy of up to 40 percent tax (20 percent by the Centre and an equal amount by the states) but the effective tax rates will be kept at the previously approved levels of 5, 12, 18 and 28 percent. He added that this is being done to obviate the need for going to Parliament in case the levy is to be raised on certain goods and services. This will also help in a scenario where the cess on de-merit goods being proposed to compensate states for loss of revenue from GST, is to be merged with the tax rate itself.