By TIOL News Service

NEW DELHI, SEPT 30, 2016: WHILE addressing the media persons immediately after the conclusion of the Second Meeting of the GST Council, its Chairman, Mr Arun Jaitley, said that the key critical decisions which were taken are - 1) there would be some sort of GST levy on all exempted items and the States and the Centre would be paying the incentive or subsidy back to them after making a budget allocation; and 2) the Council approved the Draft GST Rules relating to the business processes such as registration, payment, invoice, refund and returns.

While talking about the decision to do away with the prevailing exemption regime, Mr Jaitley said that although the concept of exemption is going to be grandfathered but the stake-holders would be reimbursing such taxes collected to all those which are going to be exempted as per the economic necessities or political wisdom of a State. In other words, both the Centre and the States are going to guillotine the present lists of exempted goods and services and subject them to the levy of GST and then make budget allocation for incentive or subsidy to be given to certain sectors and perhaps pay them in cash or some other form.

One implication of such a decision is going to be the end of era for the area-based exemption which Centre had granted to the hill states of Himachal Pradesh, Uttaranchal, J & K and the North-East. Similarly, the VAT subsidies offered by several States to promote industrialisation are going to be phased out. In lieu of phasing out such exemptions, the Governments may decide to compensate them in different manner after making express provisions in their budgetary allocations. The details of the new scheme are going to be worked out later by the technical committees.

The Second decision was taken when the Council approved the subordinate legislations of Draft Rules for business processes and the same would be notified after the GST law is passed by the Parliament. All these draft rules were made public only early this week and a couple of days were given to the trade and industry to send their feedback.

At the start of the meeting, the Council also approved the minutes of the last meeting and also decided to hold its third meeting on October 18, 19 & 20, pushing the schedule by a day to make it convenient to many Members. However, a major chunk of the time was devoted to the contentious issue of service tax assessment where many States insisted on reopening the decision taken at the last meeting. Although the Centre insisted that this issue of dual control was settled at the last meeting but many States insisted on getting control over small service providers as agreed upon during the initial days of negotiations. The GST Council Chairman said that since the discussion remained inconclusive, it would be taken up again at its Third Meeting.