ET in the classroom: GST,the next steps

Having been approved by Parliament, the constitutional amendment will have to be okayed by the state assemblies. The focus then shifts to the GST rate and how it will be set. ET explains the key concepts and the process.

GST COUNCIL, REVENUE NEUTRAL RATE
The constitutional amendment provides for the setting up of the GST Council, comprising Centre and state representatives. It will decide the revenue neutral rate ( RNR), the rate at which there will be no loss in aggregate central and state tax revenue.

The council will take on board recommendations of various committees on the subject. It will also take into account conditions such as the following: The tax should not be a burden on consumers, it should not be inflationary, it should not undermine the simplicity of the GST regime, the impact on tax revenue should be minimal and compliance should be easy.

GST RATE STRUCTURE
The revenue neutral rate gets converted into a three-slab GST rate structure depending on exemptions. Essential commodities will be charged at low rates offset by higher ‘sin’ taxes on goods regarded as luxuries. A so-called standard or GST rate will be the middle slab and apply to most goods and services.

CENTRE-STATE SPLIT
The single GST rate will be split between and central GST and state GST. The split will be decided by the GST Council.