India sets enforcement rules for GST, to decide rate next month

NEW DELHI: Federal and state officials have resolved key issues on enforcing a planned sales tax in India, Finance Minister Arun Jaitley said on Friday, and will meet next month to decide the main tax rate and those for different sectors.

Implementation of the long-awaited goods and services tax (GST), planned for April 2017, is expected to boost revenue through better compliance while making life simpler for businesses that now pay a host of federal and state levies.

The GST Council, comprising federal and state finance ministers, agreed at its first meeting that all businesses with annual turnover of 15 million rupees ($225,000) or more would be administered either by federal or state tax officials, depending on risk parameters.

"All decisions have been taken without a vote," Jaitley told reporters after the two-day meeting, adding the council will meet again on Oct. 17-19 to finalise rates under the new tax law.

The issue of "dual control" had been one concern on GST, but the understanding reached on Friday made clear that one authority - either state or federal - would be responsible for assessing a company's tax liability. Industry and tax experts were concerned that their demand of single control was not fully accepted.

'NOT GOOD NEWS'

Rajeev Dimri, a tax expert with consultancy BMR & Associates LLP, said all companies with an annual turnover of at least 15 million rupees will come under dual control.

"That is not a good news. It is not in the best interest of industry," he said. Firms with annual turnover below 10 million rupees ($150,000) in eight northeastern states and 20 million rupees in other parts of the country would be exempted from the tax, Jaitley said. Plans to introduce a unified sales tax have gained momentum after more than half of India's state legislatures followed the federal parliament in passing the 122nd amendment to the constitution, which paves the way for the GST.

Tough bargaining on the rate and scope of the tax continues as many states want an average tax rate of 22-23 percent compared with the federal government suggestion of 18-19 percent.

Both the federal and state legislatures must pass three laws setting the rate and scope of the GST before the tax comes into effect. Jaitley hopes for passage in the winter session of parliament scheduled for November.