GST Council meeting begins today; 5 issues that will set the agenda

In its previous meeting that was held last month, the GST Council had finalised on the area-based exemptions and outlined how 11 states will be treated under the GST regime.

Here are 5 issues that GST Council will deliberate during the 3-day meeting:

1. GST Tax Rate

A report in Business Standard stated that Centre may propose to implement a four-tier tax structure with an upper slab of 26 per cent. The proposal, if accepted, will lead to almost 20-25 per cent of all taxable goods falling under the peak rate slab.

The discussion paper to be presented in the meeting is expected to have proposed a standard rate of 18 per cent while the states have been pushing for a standard 22 per cent rate.

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2. Compensation to States

The Centre has proposed many compensation strategies to states in its previous meetings. According to the proposals, a state can get compensated if:

a. The states will get compensated if the revenues earned under the GST falls short of the average proceeds during states' best three years out of five years.

b. Leaving out two outlying years and taking an average of the remaining three years, if the revenue from GST is still falling short, the state gets compensated.

Other proposals for compensation were:

a. Fixing a base year and growth rate for the states and monitoring whether the revenue from the GST falls short.

b. Fix a rate of revenue growth and allocate the required compensation.

However, in the area of compensation the Council has never been able to gather consensus.

Since the Centre is determined to provide full compensation for the first five years of the GST, a decision on compensation will be arrived in this meet.