New Delhi, March 5, 2017

The states and the Centre on Saturday decided on a 5% levy on dhabas and small restaurants under the goods and services tax (GST), while moving ahead with two key legislations, Central GST (CGST) and Integrated GST (IGST), with a final decision expected in a fortnight.

The GST Council, the panel comprising Union and state finance ministers, also agreed to cap the levy at 40%, while sticking to the earlier slabs of 5, 12, 18 and 28%. "The rates will be what has been decided by the Council. There won't be a higher rate of taxation. But the cap rate in the legislation is always put at a higher level to leave a headspace, just as in the Customs Act you have a difference between the bound rate and applied rate. So the applied rate is going to be what the council has decided," finance minister Arun Jaitley told a press conference, while expressing optimism of the prospects of the reform kicking in from July.

With the two key legislations cleared by the council, the government now proposes to seek parliamentary approval once the budget session resumes on March 9. The C-GST legislation will empower the Centre to levy tax on goods and services once central excise and service tax are subsumed. I-GST is to be levied on inter-state supplies, while S-GST will let the states levy tax after VAT and other levies are subsumed in GST. This bill will need to be approved by state legislatures, while UT-GST will also need Parliament nod. Getting states on board has been problematic and those like West Bengal have been raising concerns with several proposals on the table. On Saturday, however, Bengal finance minister Amit Mitra appeared more conciliatory although he said that 26 amendments were accepted, reflecting India's "federalist character".

[The Times of India]