As the Centre and states kick off consultations to decide the crucial rate for the goods and services tax (GST), the Modi government is all set to back a pocket-friendly rate, amid indications that a standard rate of 18-19% might receive the government’s backing.
On Monday, the Cabinet cleared the establishment of the GST council, the panel headed by the Union finance minister with all state FMs as its members, setting the stage for nuts and bolts issues to be thrashed out with the government setting a two-month window for the exercise. States such as Kerala have been vocal in suggesting the levy should be upwards of 20% to ensure that state revenue collections are not impacted by the GST rollout from April.
Sources said the Centre would in any case compensate the states for any revenue loss for five years on account of GST implementation but added that the negotiations would be challenging. A consensus will quicken GST rollout but a stalemate over the rate and other issues such as exemptions, compensation formula and nitty-gritty of draft legislation will require more political negotiations.
The rates will be top of the agenda when the GST council holds its first meeting on September 22 and 23 .
Apart from the rates, the Centre and states also need to agree on the final compensation structure, the list of exemptions, control over entities, the final draft of the three bills, India GST, Central GST and the state legislations, after factoring in the feedback received from industry.