State FMs to elect new Chmn on Friday;discuss model GST law

State finance ministers will meet tomorrow to elect the new Chairman of the Empowered Committee and also discuss the model Goods and Services Tax (GST) law as well as report on the revenue neutral rate. The Empowered Committee of State Finance Ministers has to elect the new Chairman as K M Mani has resigned from the post subsequent to stepping down as the Kerala Finance Minister. The Centre had last month circulated among states the draft of CGST, SGST and iGST for their comments.

Besides, the report of the National Institute of Public Finance and Policy (NIPFP) on the revenue neutral rate (RNR) has also been circulated among the states. "The panel will discuss the model laws and i-GST law. Also NIPFP report on RNR may come up for discussion," a government official said.

The RNR is the one at which there will be no revenue loss to the states after GST implementation. A sub-committee on GST had in November 2014 suggested that the RNR of GST be pegged at about 27 percent. The sub panel had suggested states GST at 13.91 percent and Central GST at 12.77 percent.

However, a recalculation of RNR was necessary as that RNR does not take into account the taxation of petroleum products as also the 1 percent additional tax which states can levy as part of the GST Constitution Amendment Bill. While liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided at a future date by the GST Council, which will have two-third of its members from states. The Rajya Sabha Select Committee has suggested that the Goods and Services Tax (GST) rate should not go beyond 20 percent as higher rates could fuel inflation and erode the confidence of consumers.

Internationally, the GST rate ranges from 16-20 percent. However, there are some exceptions like Japan, Australia and Germany, where the rates are 8 percent, 10 percent and 23 percent, respectively.