Centre, States broadly agree on the GST exemption list, says CEA Subramanian

The Centre and the States are broadly on the same page on the number of items that will be exempted from the Goods & Services Tax (GST) regime.

Arvind Subramanian, Chief Economic Advisor to the Finance Ministry, told BusinessLine that “the exact list of exemptions will be decided by the proposed GST Council. But there is an understanding that the 300 (existing exemptions) will come down to 90 for both the Centre and the States… There seems to be a broad political consensus on this.” Subramanian, who recently submitted his report on the proposed GST rates to Finance Minster Arun Jaitley, had likened the economy to an “exemption Raj” and stressed the need to rationalise such incentives. Currently, the number of exemptions at the Centre stands at 292 (excise duty related) and 90 at the State level (VAT-related). Asked if he agreed with the figure of 1.4 per cent as GST’s contribution to GDP, Subramanian said: “I didn’t make any such calculations. Hopefully, it will help, but we didn’t factor it in. If that happens, it will be a bonus.”

Declining to give a definitive timeline for the introduction of GST, Subramanian said administrative preparations are going on for its roll out. “It’s difficult to give a timeline because it depends on when the Constitution Amendment Bill is passed. Once the Constitution Amendment is done, we will try and implement it as soon as possible. Since it is a transaction tax, it doesn’t need to be implemented from beginning of the fiscal. It can be implemented mid-way also,” he said.

The government is expected to push through the Constitution Amendment Bill for GST in the Budget session of Parliament to ensure a swift rollout of the tax. The work on the enabling legislation is likely to be concluded by this month-end. The draft GST law, which heavily borrows from Subramanian’s report, is likely to include the tax rates, define the term ‘supply’, and set the threshold level for the tax.

The Finance Ministry is finalising the model GST law, which has already undergone 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.