By TIOL News Service

NEW DELHI, SEPT 23, 2016: TAKING a leaf from the federal spirit demonstrated by most of the States yesterday, the GST Council today closed the most contentious issue of finalising the Exemption Threshold which is a critical input for arriving at the final GST standard rate. Much to the surprise of most fiscal watchers, the Council today agreed to Rs 20 lakhs as the exemption limit for goods as well as services for the entire country except for the 11 States for which special provision was made in the Constitution Amendment Act. The exemption limit for these special provision States, including hill states, numbering 11, is going to be Rs 10 lakhs. As per Article 279A, the special provisions will apply to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

Another major decision which was taken by the Council today is with respect to the dual control over the GST assessees. Along the line of general expectations, most of the Members today agreed to the suggestion that there should be an element of continuity so far as small assessees are concerned so that they are comfortable even in the new regime. Guided by this rationale it has been decided that all VAT assessees up to Rs 1.5 Crore turnover will continue to be within the control of State GST authorities. Similarly, all service tax assessees will continue to remain with the Centre. Therefore, there is no setback for the CBEC and it also meets the demand of the IRS officers that their turf should not be eroded. As regards the assessees above Rs 1.5 Crore, there will be dual control of the Centre as well as the States. With this decision, a major irritant in the Centre's relations with the States has been put to rest.

However, sources told TIOL that the new arrangement which has been agreed upon by the Centre and the States is going to be reviewed after THREE years. It is being expected that once the States begin dealing with service tax assessees above Rs 1.5 Crore turnover, they would gain in experience and technical expertise. Secondly, the Centre would train the State officials in service tax matters. So, after three years, the GST Council would take a fresh look at the need to make any change in the present solution thrashed out after due diligence. The detailed modalities are going to be worked out by the technical teams of officers in the coming days.

As regards the compensation package, a breakthrough was achieved when the States today agreed to the BASE YEAR of 2015-16 which is going to help build the parameters for working out the quantum of compensation to be paid to the States in case of any revenue loss. Although some States wanted the current fiscal year as the base year but the same was not agreed upon as many States had hiked the VAT rates in the current fiscal. In fact, Maharashtra did it till the day the various sections of the Constitution Amendment Act were notified on September 16.

The Council also agreed to meet next week on September30, to thrash out more issues for ensuring speedy clearance of the legislative works. As per sources, the Council would also meet in the second half of October to finalise some of the critical components of the new tax system.