New Delhi, Sep 23 (PTI) In a big step forward on GST implementation, the Centre and states today reached an agreement on keeping traders with annual revenue of up to ₹ 20 lakh out of the new national sales tax regime that will subsume all cesses.

While the two sides, at the meeting of the GST Council, agreed on the contentious issues of revenue threshold - below which traders will be exempted from GST, and sharing of administrative powers, the all crucial GST rates will be decided in the meeting to be held on October 17-19.

The newly constituted Council decided to keep the revenue exemption limit at ₹ 20 lakh for all states with the exception of north eastern and the hill states where the limit will be ₹ 10 lakh, Finance Minister Arun Jaitley said here.

Resolving issues over dual control over small traders, it decided that states will have exclusive control over all dealers up to a revenue threshold of ₹ 1.5 crore in a year.

A mechanism would be worked out for traders above ₹ 1.5 crore to ensure that a dealer is regulated either by the Central government or the state government and not both.

Broad principles for compensating states for any loss of revenue when the new regime is rolled out from April 1, 2017 were also discussed at the two day meeting of the panel that is headed by Union Finance Minister and includes representatives of all states.

On service tax, it was decided that in absence of expertise with states, the Centre will continue to exercise control over all the 11 lakh service tax registered dealers irrespective of their revenue levels, he said.

Jaitley said the next meeting on September 30 will finalise the draft rules regarding implementation of exemptions.

While 2015-16 will be the base year for calculating revenue compensating to states for any loss of revenue arising from rollout of GST, the final methodology will be worked out in next meetings, he said.

The exemption threshold fixed is lower than ₹ 25 lakh that most states had demanded. Some states were pitching for ₹ 10 lakh limit to limit their revenue loss.

The same for North-Eastern states is twice of the ₹ 5 lakh that was under deliberation till yesterday.

The exemption list has also been cut down to 90 items from the current 300 goods and services. Also, the meeting decided that all cesses will be subsumed in the GST, Jaitley said. .

 

GST exemption threshold set with differentiated limits for vulnerable states; administrative control and rates deferred for further meetings. Agreement establishes a GST exemption threshold with lower differentiated limits for north-eastern and hill states, narrows the exemption list, and subsumes all cesses into GST. States will exercise exclusive administrative control over dealers up to a specified turnover ceiling; a mechanism will allocate regulatory responsibility for larger dealers to either the Centre or a state to avoid dual control. The Centre will retain control over existing service tax registrants. Broad principles for compensating states for transitional revenue impact were discussed and a base year for revenue comparison was indicated, with further methodology and rate-setting deferred to future meetings.