GST Council starts work and sets Rs 20 lakh as exemption limit

The GST Council has started its difficult work of structuring the newly agreed GST in its first meeting. As an initial decision, the Council has agreed on an exemption limit of Rs 20 lakh. This means that traders and entities whose turnover is less than Rs 20 lakh annually doesn’t come under the tax net.

At the two-day inaugural meeting of the Council, a consensus was reached on rules for setting the GST rates. Design of the rate structure will be the core work of the Council. The Council has agreed to meet on September 30 to finalise rules for rate determination and a subsequent meeting on October 17-19.

The exemption threshold of Rs 20 lakh will not be applicable for geographically difficult regions comprising of North East and hilly states. For these states the threshold will be Rs 10 lakh.

In another decision, the Council also agreed to adopt a formula for compensating states and agreed to merge all existing cess into the GST. There are large number of cess at the indirect tax system at present.

A cross- empowerment model for tax administration is also agreed as the new tax need more cooperation between the center and states at the administrative level. Here, tax payers need to connect himself with only one tax authority (center or state) for paying Central GST, State GST and iGST. While central and state GSTs are for the respective government taxation, iGST is for interstate trade.

Regarding the compensation formula on the basis of which the center has to fully compensate the states for revenue loss during the first five years, 2016 has been adopted as the base year.