Comments of the Department of Revenue (DoR) on the First Discussion Paper on GST

Sr. No. Para No. of the Discussion Paper Issues Comments of the DoR
1 3.1 It is important to tae note of the si!nificant a"ministrative issues invo#ve" in
"esi!nin! an effective GST mo"e# in a fe"era# s$stem %ith the o&'ective of havin! an
overa## harmonious structure of rates. To!ether %ith this( there is a nee" for upho#"in! the
po%ers of Centra# an" State Governments in their ta)ation matters. Further( there is a#so
the nee" to propose a mo"e# that %ou#" &e easi#$ imp#ementa&#e( %hi#e &ein! !enera##$
accepta&#e to staeho#"ers. Agreed.
* 3.* +eepin! in vie% the report of the ,oint -orin! Group on Goo"s an" Services Ta)(
the vie%s receive" from the States an" Government of In"ia( a "ua# GST %ith "efine"
functions an" responsi&i#ities of the Centre an" the States is recommen"e" . .n
appropriate mechanism that %i## &e &in"in! on &oth the Centre an" the States shou#" &e
%ore" out %here&$ the harmonious rate structure a#on! %ith the nee" for further
mo"ification cou#" &e uphe#"( if necessar$ %ith a co##ective#$ a!ree" Constitutiona#
.men"ment. Dual GST model with appropriate binding mechanism to harmonise
the various important aspects of the GST like rate structure, taxation base,
exemption etc. between Centre and States is agreed.
3 3.* (i) The GST sha## have t%o components/ one #evie" &$ the Centre (hereinafter
referre" to as Centra# GST)( an" the other #evie" &$ the States 0hereinafter referre" to as
State GST1. Rates for Centra# GST an" State GST shou#" &e prescri&e" appropriate#$(
ref#ectin! revenue consi"erations an" accepta&i#it$. This "ua# GST mo"e# %ou#" &e
imp#emente" throu!h mu#tip#e statutes (one for CGST an" a SGST statute for ever$
state). 2o%ever( the &asic features of #a% such as char!ea&i#it$( "efinition of ta)a&#e
event an" ta)a&#e person( measure of #ev$ inc#u"in! va#uation provisions( &asis of
c#assification etc. shou#" &e uniform across these statutes as far as practica&#e. Agreed.
n addition, GST on inter!State transactions should be levied b" the Centre. SGST
on imports should also be levied and collected b" the Centre. Centre should pass on
SGST collection on imports to concerned States on the destination principle
3 3.* (ii) The Centra# GST an" the State GST shou#" &e app#ica&#e to a## transactions of
!oo"s an" services ma"e for a consi"eration e)cept the e)empte" !oo"s an" services(
!oo"s are outsi"e the purvie% of GST an" the transactions %hich are &e#o% the
prescri&e" thresho#" #imits. Agreed. There should be a common base for taxation
between Centre and States.
4 3.* (iii) The Centra# GST an" State GST are to &e pai" to the accounts of the Centre an"
the States separate#$ . It %ou#" have to &e ensure" that account5hea"s for a## services an"
!oo"s %ou#" have in"ication %hether it re#ates to Centra# GST or State GST (%ith
i"entification of the State to %hom the ta) is to &e cre"ite"). Agreed. n addition, GST
should be paid to the accounts of the Centre.
6 3.* (iv) Since the Centra# GST an" State GST are to &e treate" separate#$( ta)es pai"
a!ainst the Centra# GST sha## &e a##o%e" to &e taen as input ta) cre"it (ITC) for the
Centra# GST an" cou#" &e uti#i7e" on#$ a!ainst the pa$ment of Centra# GST. The same
princip#e %i## &e app#ica&#e for the State GST . . ta)pa$er or e)porter %ou#" have to
maintain separate "etai#s in &oos of account for uti#i7ation or refun" of cre"it. Further(
the ru#es for tain! an" uti#i7ation of Cre"it for the Centra# GST an" the State GST %ou#"
&e a#i!ne". Agreed.
8 3.* (v) Cross uti#i7ation of ITC &et%een the Centra# GST an" the State GST shou#" not
&e a##o%e" e)cept in the case of inter5State supp#$ of !oo"s an" services un"er the IGST
mo"e# %hich is e)p#aine" #ater. Agreed.
9 3.* (vi) I"ea##$( the pro&#em re#ate" to cre"it accumu#ation on account of refun" of GST
shou#" &e avoi"e" &oth &$ the Centre an" the States e)cept in the cases such as of
e)ports( purchase of capita# !oo"s( input ta) at hi!her rate than output ta) etc. %here(
a!ain refun":a"'ustment shou#" &e comp#ete" in a time &oun" manner. Agreed.
;3.* (vii)To the e)tent feasi&#e( uniform proce"ure for co##ection of &oth Centra# GST an"
State GST ma$ &e prescri&e" in the respective #e!is#ation for Centra# GST an" State GST.
Agreed.
1<3.* (viii) The a"ministration of the Centra# GST to the Centre an" for State GST to the
States %ou#" &e !iven. This %ou#" imp#$ that the Centre an" the States %ou#" have
concurrent 'uris"iction for the entire va#ue chain an" for a## ta)pa$ers on the &asis of
thresho#"s for !oo"s an" services prescri&e" for the States an" the Centre. Agreed. The
threshold for goods and services should be common between Centre and State on
one hand and between goods and services on the other.
113.* (i)) The present thresho#"s prescri&e" in "ifferent State =.T .cts &e#o% %hich
=.T is not app#ica&#e varies from State to State. . uniform State GST thresho#" across
States is "esira&#e an"( therefore( it is recommen"e" that a thresho#" of !ross annua#
turnover of Rs.1< #ah &oth for !oo"s an" services for a## the States an" >nion Territories
ma$ &e a"opte" %ith a"e?uate compensation for the States (particu#ar#$( the States in
North5@astern Re!ion an" Specia# Cate!or$ States) %here #o%er thresho#" ha" prevai#e"
in the =.T re!ime. +eepin! in vie% the interest of sma## tra"ers an" sma## sca#e
in"ustries an" to avoi" "ua# contro#( the States a#so consi"ere" that the thresho#" for
Centra# GST for !oo"s ma$ &e ept Rs.1.4 Crore an" the thresho#" for Centra# GST for
services ma$ a#so &e appropriate#$ hi!h. It ma$ &e mentione" that even no% there is a
separate thresho#" of services (Rs. 1< #ah) an" !oo"s (Rs. 1.4 crore) in the Service Ta)
an" C@N=.T. There should be a uniform threshold for goods and services for both
SGST and CGST. This annual turnover threshold could be #s.$% lakh or even more
than that. The threshold exemption should not appl" to dealers and service
providers who undertake inter!State supplies. The problem of dual control is better
addressed through a compounding scheme as well as administrative simplification
for small dealers through measures such as&
#egistration b" single agenc" for both SGST and CGST without manual interface
'o ph"sical verification of premises and no pre!deposit of securit"
Simplified return format
(onger fre)uenc" for return filing
*lectronic #eturn filing through certified service centres + CAs etc.
Audit in $!,- cases based on risk parameters
(enient penal provisions
There ma" not be an" need to have direct link between compensation package, if
decided for, and the threshold for registration for 'orth!*astern and special
categor" States.
1*3.* ()) The States are a#so of the vie% that Composition : Compoun"in! Scheme for
the purpose of GST shou#" have an upper cei#in! on !ross annua# turnover an" a f#oor ta)
rate %ith respect to !ross annua# turnover . In particu#ar there %i## &e a compoun"in! cut5
off at Rs.4< #ah of !ross annua# turnover an" a f#oor rate of <.4A across the States. The
scheme shou#" a#so a##o% option for GST re!istration for "ea#ers %ith turnover &e#o% the
compoun"in! cut5off. Agreed. Centre ma" also have a Composition Scheme up to
gross turnover limit of #s. .% lakh, if threshold for registration is kept as #s.$% lakh.
The floor rate of %..- will be for SGST alone, in case Centre also brings a
Composition Scheme for small assesses. The Centre ma" consider leaving the
administration of Compounding Scheme, both for CGST and SGST to the States.
133.* ()i) The ta)pa$er %ou#" nee" to su&mit perio"ica# returns( in common format as far
as possi&#e( to &oth the Centra# GST authorit$ an" to the concerne" State GST authorities.
n addition, taxpa"ers having inter!State transactions will re)uire submission of
returns to related Central GST authorit".
133.* ()ii) @ach ta)pa$er %ou#" &e a##otte" a P.N5#ine" ta)pa$er i"entification num&er
%ith a tota# of 13:14 "i!its. This %ou#" &rin! the GST P.N5#ine" s$stem in #ine %ith the
prevai#in! P.N5&ase" s$stem for Income ta) faci#itatin! "ata e)chan!e an" ta)pa$er
comp#iance. There should be a uniform registration s"stem through!out the countr"
and this registration s"stem should enable eas" linkage with ncome Tax database
through use of /A' number.
143.* ()iii) +eepin! in min" the nee" of ta)pa$ers convenience( functions such as
assessment( enforcement( scrutin$ an" au"it %ou#" &e un"ertaen &$ the authorit$ %hich
is co##ectin! the ta)( %ith information sharin! &et%een the Centre an" the States. Since
the tax base is to be identical for the two components, vi0., CGST and SGST, it is
desirable that an" dispute between a taxpa"er and either of the tax administrations
is settled in a uniform manner. The possibilit" of setting up a harmonised s"stem for
scrutin", audit and dispute settlement ma" be developed.
16 3.3 B n app#ication of the princip#e( it is recommen"e" that the fo##o%in! Centra#
Ta)es shou#" &e( to &e!in %ith( su&sume" un"er the Goo"s an" Services Ta)/
(i) Centra# @)cise Dut$
(ii) .""itiona# @)cise Duties
(iii) The @)cise Dut$ #evie" un"er the Ce"icina# an" Toi#etries Preparation .ct
(iv) Service Ta)
(v) .""itiona# customs "ut$( common#$ no%n as countervai#in! "ut$ (C=D)
(vi) Specia# .""itiona# Dut$ of Customs 5 3A (S.D)
(vii) Surchar!es( an"
(viii) Cesses. Agreed.
Fo##o%in! State ta)es an" #evies shou#" &e( to &e!in %ith( su&sume" un"er GST/
(i) =.T : Sa#es ta)
(ii) @ntertainment ta) (un#ess it is #evie" &$ the #oca# &o"ies).
(iii) Du)ur$ ta)
(iv) Ta)es on #otter$( &ettin! an" !am&#in!.
(v) State Cesses an" Surchar!es in so far as the$ re#ate to supp#$ of !oo"s an" services.
(vi) @ntr$ ta) not in #ieu of octroi. *lectricit" dut", 1ctroi, purchase tax and taxes
levied b" local bodies should also be subsumed under GST.
Purchase ta)/ Some of the States fe#t that the$ are !ettin! su&stantia# revenue from
Purchase Ta) an"( therefore( it shou#" not &e su&sume" un"er GST %hi#e ma'orit$ of the
States %ere of the vie% that no such e)emptions shou#" &e !iven. The "ifficu#ties of the
foo" !rain pro"ucin! States an" certain other states %ere appreciate" as su&stantia#
revenue is &ein! earne" &$ them from Purchase Ta) an" it %as( therefore( fe#t that in case
Purchase Ta) has to &e su&sume" then a"e?uate an" continuin! compensation has to &e
provi"e" to such States. This issue is &ein! "iscusse" in consu#tation %ith the
Government of In"ia. /urchase tax is nothing but sales tax where the responsibilit"
for collection of tax is with the purchaser 2and not with the seller as in the case of
sales tax3. 4eeping 5purchase tax6 outside will give the loophole to the States to
impose 5purchase tax6 on an" commodit" 2food!grains, agricultural + forest produce,
minerals, industrial inputs etc.3 over and above GST. 7ence, purchase tax must be
subsumed. The compensation package, if agreed, need not have an" link to an"
particular tax being subsumed.
Ta) on items containin! .#coho#/ .#coho#ic &evera!es ma$ &e ept out of the purvie% of
GST. Sa#es Ta):=.T can &e continue" to &e #evie" on a#coho#ic &evera!es as per the
e)istin! practice. In case it has &een ma"e =ata&#e &$ some States( there is no o&'ection to
that. @)cise Dut$( %hich is present#$ &ein! #evie" &$ the States ma$ not &e a#so affecte".
Alcoholic beverages should be brought under the purview of GST in order to
remove the cascading effect on GST paid on inputs such as raw material and
packaging material. Sales tax + 8AT and State excise dut" can be charged over and
above GST. Similar dispensation should appl" to opium, ndian hemp and other
narcotic drugs and narcotics but medicines or toilet preparations containing these
substances should attract onl" GST.
Ta) on To&acco pro"ucts/ To&acco pro"ucts shou#" &e su&'ecte" to GST %ith ITC. Centre
ma$ &e a##o%e" to #ev$ e)cise "ut$ on to&acco pro"ucts over an" a&ove GST %ithout
ITC. Agreed.
Ta) on Petro#eum Pro"ucts/ .s far as petro#eum pro"ucts are concerne"( it %as "eci"e"
that the &aset of petro#eum pro"ucts( i.e. cru"e( motor spirit (inc#u"in! .TF) an" 2SD
shou#" &e ept outsi"e GST as is the prevai#in! practice in In"ia. Sa#es Ta) cou#"
continue to &e #evie" &$ the States on these pro"ucts %ith prevai#in! f#oor rate. Simi#ar#$(
Centre cou#" a#so continue its #evies. . fina# vie% %hether Natura# Gas shou#" &e ept
outsi"e the GST %i## &e taen after further "e#i&erations. 4eeping crude petroleum and
natural gas out of the GST net would impl" that the credit on capital goods and
input services going into exploration and extraction would not be available resulting
in cascading. Diesel, AT9 and motor spirit are derived from a common input, vi0.,
crude petroleum along with other refined products such as naphtha, lubricating oil
base stock, etc. (eaving diesel, AT9 and motor spirit out of the purview of GST
would make it extremel" difficult for refineries to apportion the credit on capital
goods, input services and inputs. These products are principal inputs for man"
services such as aviation, road transport, railwa"s, cab operators etc. As such, these
ma" be levied to GST and in select cases credit of GST paid on these items ma" be
disallowed in order to minimi0e the possibilit" of misuse.
Ta)ation of Services/ .s in"icate" ear#ier( &oth the Centre an" the States %i## have
concurrent po%er to #ev$ ta) on a## !oo"s an" services . In the case of States( the
princip#e for ta)ation of intra5State an" inter5State has a#rea"$ &een formu#ate" &$ the
-orin! Group of Principa# Secretaries:Secretaries of Finance : Ta)ation an"
Commissioners of Tra"e Ta)es %ith senior representatives of Department of Revenue(
Government of In"ia. For inter5State transactions an innovative mo"e# of Inte!rate" GST
%i## &e a"opte" &$ appropriate#$ a#i!nin! an" inte!ratin! CGST an" SGST. The sub!
working group of the *mpowered Committee in its report has suggested two options
each for : to : and : to C transactions. A decision is re)uired to be taken b" the
*mpowered Committee with respect to the option to be adopted. Such a decision
ma" be taken and communicated to Do#.
18 3.4 Inter5State Transactions of !oo"s E services/ The @mpo%ere" Committee has
accepte" the recommen"ations of the -orin! Group of concerne" officia#s of Centra#
an" State Governments for a"option of IGST mo"e# for ta)ation of inter5State transaction
of Goo"s an" Services The scope of IGST Co"e# is that Centre %ou#" #ev$ IGST %hich
%ou#" &e CGST p#us SGST on a## inter5State transactions of ta)a&#e !oo"s an" services
%ith appropriate provision for consi!nment or stoc transfer of !oo"s an" services.
The inter5State se##er %i## pa$ IGST on va#ue a""ition after a"'ustin! avai#a&#e cre"it of
IGST( CGST( an" SGST on his purchases. The @)portin! State %i## transfer to the Centre
the cre"it of SGST use" in pa$ment of IGST. The Importin! "ea#er %i## c#aim cre"it of
IGST %hi#e "ischar!in! his output ta) #ia&i#it$ in his o%n State. The Centre %i## transfer
to the importin! State the cre"it of IGST use" in pa$ment of SGST. The re#evant
information is a#so su&mitte" to the Centra# .!enc$ %hich %i## act as a c#earin! house
mechanism( verif$ the c#aims an" inform the respective !overnments to transfer the
fun"s.
The ma'or a"vanta!es of IGST Co"e# are/
a) Caintenance of uninterrupte" ITC chain on inter5state transactions.
&) No upfront pa$ment of ta) or su&stantia# &#oca!e of fun"s for the inter5state se##er or
&u$er.
c) No refun" c#aim in e)portin! State( as ITC is use" up %hi#e pa$in! the ta).
") Se#f monitorin! mo"e#.
e) Deve# of computeri7ation is #imite" to inter5state "ea#ers an" Centra# an" State
Governments shou#" &e a&#e to computeri7e their processes e)pe"itious#$.
f) .s a## inter5state "ea#ers %i## &e e5re!istere" an" correspon"ence %ith them %i## &e &$
e5mai#( the comp#iance #eve# %i## improve su&stantia##$.
!) Co"e# can tae FGusiness to GusinessH as %e## as FGusiness to ConsumerH transactions
into account. Agreed. t ma" however be noted that GST model will work smoothl"
onl" when there is a common threshold for goods and services and for Centre and
States. 7aving more than one rate either for CGST or SGST will complicate the
working of GST model.
19 3.6 GST Rate Structure/ The @mpo%ere" Committee has "eci"e" to a"opt a t%o5rate
structure I a #o%er rate for necessar$ items an" !oo"s of &asic importance an" a stan"ar"
rate for !oo"s in !enera#. There %i## a#so &e a specia# rate for precious meta#s an" a #ist of
e)empte" items. For upho#"in! of specia# nee"s of each State as %e## as a &a#ance"
approach to fe"era# f#e)i&i#it$( an" a#so for faci#itatin! the intro"uction of GST( it is &ein!
"iscusse" %hether the e)empte" #ist un"er =.T re!ime inc#u"in! Goo"s of Doca#
Importance ma$ &e retaine" in the e)empte" #ist un"er State GST in the initia# $ears. It is
a#so &ein! "iscusse" %hether the Government of In"ia ma$ a"opt( to &e!in %ith( a simi#ar
approach to%ar"s e)empte" #ist un"er the CGST. There should be a single rate of
SGST both for goods and services. A two rate structure for goods would pose the
following problems&
a3 (ikelihood of inversions in dut" structure with raw materials and intermediates
being at a higher rate and finished goods being at a lower rate, especiall" as the
intention is to appl" the lower rate to necessities.
b3 nversions would result in input credit accumulation and demand for refunding
the same from time to time.
c3 The general rate 2#'#3 would have to be higher than under a single rate
structure.
d3 Currentl", services are chargeable to tax at a single rate. Adopting a dual rate for
goods would generate a similar demand for services too.
e3 7aving different rates for goods and services would impl" that the distinction
between goods and services should continue.
Around ;; items presentl" exempted under 8AT ma" continue to remain exempted
in GST regime. There should be no scope, with individual States, for expansion of
this list even for goods of local importance. *fforts will be made b" Centre to
substantiall" reduce the number of items presentl" exempted under C*'8AT
regime. At the end, there must be a common list of exemptions for CGST and SGST.
The States are of the vie% that for CGST re#atin! to !oo"s( the Government of In"ia ma$
a#so have a t%o5rate structure( %ith conformit$ in the #eve#s of rate un"er the SGST. For
ta)ation of services( there ma$ &e a sin!#e rate for &oth CGST an" SGST. There should
be one CGST rate both for goods as well as services.
The e)act va#ue of the SGST an" CGST rates( inc#u"in! the rate for services( %i## &e
ma"e no%n "u#$ in course of appropriate #e!is#ative actions. SGST and CGST rates
are re)uired to be put in public domain much before initiation of legislative action.
1; 3.8 Jero Ratin! of @)ports/ @)ports shou#" &e 7ero5rate". Simi#ar &enefits ma$ &e
!iven to Specia# @conomic Jones (S@Js). 2o%ever( such &enefits shou#" on#$ &e a##o%e"
to the processin! 7ones of the S@Js. No &enefit to the sa#es from an S@J to Domestic
Tariff .rea (DT.) %i## &e a##o%e". Agreed.
*< 3.9 GST on Imports/ The GST is propose" to &e #evie" on imports %ith necessar$
Constitutiona# .men"ments. Goth CGST an" SGST %i## &e #evie" on import of !oo"s
an" services into the countr$. The inci"ence of ta) %i## fo##o% the "estination princip#e
an" the SGST amount %i## accrue to the State %here the importe" !oo"s an" services are
consume". Fu## an" comp#ete set5off %i## &e avai#a&#e on the GST pai" on import on
!oo"s an" services. (ev" of GST on imports ma" be handled b" Centre through a
Central legislation either as a customs dut" 2as is being done now3 or along the lines
of GST. SGST collected b" Centre ma" be passed on to concerned State following
the destination principle. Taxation of import of services ma" be on the basis of
reverse charge model, as is being done at present.
*1 3.; Specia# In"ustria# .rea Scheme/ .fter the intro"uction of GST( the ta) e)emptions(
remissions etc. re#ate" to in"ustria# incentives an" specia# in"ustria# area schemes shou#"
&e converte"( if at a## nee"e"( into cash refun" or su&si"$ schemes after co##ection of ta)(
so that the GST scheme on the &asis of a continuous chain of set5offs is not "istur&e".
Re!ar"in! Specia# In"ustria# .rea Schemes( it is c#arifie" that the &enefits of such
e)emptions( remissions etc. %ou#" continue up to #e!itimate e)pir$ time &oth for the
Centre an" the States. .n$ ne% e)emption( remission etc. or continuation of ear#ier
e)emption( remission etc. %ou#" not &e a##o%e". In such cases( the Centra# an" the State
Governments cou#" provi"e reim&ursement after co##ectin! GST. Agreed.
** 3.1< IT Infrastructure/ .fter acceptance of IGST Co"e# for Inter5State transactions(
the ma'or responsi&i#ities of IT infrastructura# re?uirement %i## &e share" &$ the Centra#
Government throu!h the use of its o%n IT infrastructure faci#it$. The issues of t$in! up
the State Infrastructure faci#ities %ith the Centra# faci#ities as %e## as further improvement
of the StatesH o%n IT infrastructure( inc#u"in! TINKSLS( is no% to &e a""resse"
e)pe"itious#$ an" in a time &oun" manner. Agreed.
*3 3.11 Constitutiona# amen"ments( #e!is#ations an" ru#es for a"ministration of CGST
an" SGST/ It is essentia# to have Constitutiona# .men"ments for empo%erin! the States
for #ev$ of service ta)( GST on imports an" conse?uentia# issues as %e## as correspon"in!
Centra# an" State #e!is#ations %ith associate" ru#es an" proce"ures. -ith these specific
tass in vie%( a ,oint -orin! Group has recent#$ &een constitute" (Septem&er 3<( *<<;)
comprisin! of the officia#s of the Centra# an" State Governments to prepare( in a time
&oun" manner a "raft #e!is#ation for Constitutiona# .men"ment( "raft #e!is#ation for
CGST( a suita&#e Co"e# De!is#ation for SGST an" ru#es an" proce"ures for CGST an"
SGST. Simu#taneous steps have a#so &een initiate" for "raftin! of a #e!is#ation for IGST
an" ru#es an" proce"ures. .s a part of this e)ercise( the -orin! Group ma$ a#so a""ress
the issues of "ispute reso#ution an" a"vance ru#in!. The <oint =orking Group 2<=G3
has held several meetings b" now. Department of #evenue is closel" working with
>inistr" of (aw, Government of ndia, for finalisation of draft Constitutional
amendment. The issue of empowering States to lev" GST on imports has been
deliberated b" the <=G and the view which has emerged out of discussion is that
the Centre shall collect GST on imports and pass on the SGST component of it to
concerned State on destination principle.
*3 3.1* 2armonious structure of GST an" the StatesH autonom$ in fe"era# frame%or/ .s
a part of the e)ercise on Constitutiona# .men"ment( there %ou#" &e( as mentione" ear#ier(
in para 3.*( a specia# attention to the formu#ation of a mechanism for upho#"in! the nee"
for a harmonious structure for GST a#on! %ith the concern for the StatesH autonom$ in a
fe"era# structure. Agreed in principle.
*4 3.13Dispute Reso#ution E ."vance Ru#in!s/ .s a part of the e)ercise on "raftin! of
#e!is#ation( ru#es an" proce"ures for the a"ministration of CGST an" SGST( specific
provisions %i## a#so &e ma"e to the issues of "ispute reso#ution an" a"vance ru#in!. The
provisions related to dispute resolution, advance rulings and other business
processes need to be harmonised between Centre and States.
*6 3.13 Nee" for compensation "urin! imp#ementation of GST/ Despite the sincere
attempts &ein! ma"e &$ the @mpo%ere" Committee on the "etermination of GST rate
structure( revenue neutra# rates( it is "ifficu#t to estimate accurate#$ as to ho% much the
States %i## !ain from service ta)es an" ho% much the$ %i## #ose on account of remova# of
casca"in! effect( pa$ment of input ta) cre"it an" phasin! out of CST. In vie% of this( it
%ou#" &e essentia# to provi"e a"e?uate#$ for compensation for #oss that ma$ emer!e
"urin! the process of imp#ementation of GST for the ne)t five $ears. This issue ma$ &e
comprehensive#$ taen care of in the recommen"ations of the Thirteenth Finance
Commission. The pa$ment of this compensation %i## nee" to &e ensure" in terms of
specia# !rants to &e re#ease" to the States "u#$ in ever$ month on the &asis of neutra##$
monitore" mechanism. *mpowered Committee has alread" referred the issue to the
Thirteenth 9inance Commission 2T9C3. T9C is likel" to submit its report shortl". A
view on the sub?ect will be taken after more clarit" on the sub?ect is available.
*8 3.14 -ith this First Discussion Paper an" the .nne)ure on fre?uent#$ ase" Muestions
an" .ns%ers on GST( interaction %ith the representatives of in"ustr$( tra"e an"
a!ricu#ture %ou#" &e!in imme"iate#$ at the nationa# #eve#( an" then a#so simu#taneous#$ at
the State #eve#s. Simi#ar#$ a%areness campai!n for common consumers %ou#" a#so &e
initiate" at the same time. .s a part of the "iscussion an" campai!n the vie%s of the
in"ustr$( tra"e an" a!ricu#ture as %e## as consumer ma$ &e sou!ht to &e o&taine" in a
structure" an" time &oun" manner. *mpowered Committee ma" prepare a plan with
clear timelines for orientation of stakeholders so that re)uired steps ma" be taken
b" all the States in time.