Trying to meet the Congress halfway, the Narendra Modi-government is likely to include the rates for the Goods and Services Tax in the enabling legislation instead of the Constitution Amendment Bill.
One of the key demands of the Congress has been to include the tax rates in the Constitution Amendment Bill. This was not acceptable to the Finance Minister Arun Jaitley who had argued that the Constitution cannot be amended every time tax rates have to be changed.
The draft law, which heavily borrows from the recent report of the Chief Economic Advisor Arvind Subramanian, is likely to include the tax rates. Indications of the Congress also warming up to this proposal seems to be gaining ground as consultations between the two political parties are gathering momentum.
“The tax rates will be in the GST law, and will be notified separately, once it is passed by the Centre and States,” a senior official close to the development said. A consensus on an 18 per cent standard GST rate is also building.
The Finance Ministry is currently finalising the model GST law, which has already undergone two-three rounds of revisions. The law will be enacted by both the Centre and the States after the Constitution Amendment Bill is passed by Parliament.
The model law will also define the term “supply”, which is not explained in the Constitution Amendment Bill.
It will also vest the power to grant exemptions to the Centre and States. Both will notify their own list of exemptions. The CEA panel has already indicated — only final goods will get benefit of exemptions and those that are used by the very poor such as food items.
Further, it is likely to specify that items including alcohol, high speed diesel oil, petrol, aviation turbine fuel, petroleum crude oil and aviation gasoline would be excluded from the ambit of the GST.
However, the Finance Ministry and the Empowered Committee of State Finance Ministry are yet to finalise the threshold for the tax. Sources said discussions on the business turnover level over which GST would be levied are currently focussed in the range between ?25 lakh and ?50 lakh.
The Empowered Committee was expected to finalise the threshold level in its last meeting in November but it was referred to a sub-committee after they failed to reach a consensus.
The draft Bill is, however, likely to specify a one per cent turnover tax on small businesses that fall below the specified threshold. Once finalised, the model GST law will be vetted by the Empowered Committee.
Finance Minister Arun Jaitley is likely to discuss the draft legislation on Wednesday when he meets five industry chambers including the Confederation of Indian Industries, FICCI, Assocham, PHDCCI and the Confederation of All India Traders.