3rd GST council meeting – A Crucial Meeting, Yet no consensus on assessment of Service tax assessees

The third GST council meeting was considered a crucial one because the government has set a deadline of 1 April 2017 for GST roll out and it is just five months away.

The three day meeting concluded yesterday evening i.e. 20th October, 2016. The agenda mainly discussed during the meeting was tax rate, compensation formula and assessment of persons registered under service tax.

The rate of GST is the most important and highly debatable issue as the prices of goods and services post GST will be completely dependent on it. A senior finance ministry official said that separate rate bands for essential and luxury goods is likely to be worked out.

A minister talking about the discussion on compensation formula said that this too is a difficult one to crack and find a consensus on. The first proposal was that the state could  be compensated if the revenue under GST falls short of average tax earnings in best three years out of the past five years.

Second proposal was that out of the five years, two outliers are left out and an average is taken. If the revenue under GST is short of this, then states would be compensated.

The third and the last proposal was, a base year could be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then the state gets compensated. The base year under consideration is F.Y. 2015-16. The GST Bill seeks to provide full compensation to states for any loss incurred during first five years of roll out of the GST regime.

The last issue on the agenda was assessment of service tax assessees. While a decision to this effect was taken at the first meeting, at least two states dithered on approving the minutes of the meeting, saying they were not in favor of losing power of assessment of these assessees. Therefore the discussion on the same, along with other pending issues, will now take place in the next meeting of the council scheduled on 3-4 November 2016.