India Regulatory Brief: GST Council Expected by November 11 and Changes in the Union Budget Formulation
Goods and Services Tax (GST) Council to be Set Up by November 11
The Cabinet approved the process, formation, and functions of the Goods and Services Tax (GST) Council on Monday, September 12, 2016, following the President’s assent last week to the GST Bill. The Cabinet also decided on the constitution of the GST Secretariat and the respective officers responsible for implementing the decisions of the Council. As per the provisions of the GST Constitutional Amendment Act, the GST Council will get established within 60 days from the date of notification. This means the Council, which will be chaired by the Union Finance Minister and will comprise of representatives from all 29 states and two union territories, will have to be set up by November 11.
The role of the GST Council is critical to the success of the new indirect tax regime. The Council is expected to decide on the tax rate, exemptions, and the threshold limits in the GST regime, and will also have a dispute resolution mechanism.
In the GST council, a decision will require a three-fourth majority with the central government having a one-third vote share, and the states the remaining two-third. The government aims to implement the GST from April 1 2017, which will only be possible upon a fast resolution of these issues and the finalization of the central GST and the integrated GST laws.
Insurance Regulator Proposes Simpler e-Verification Process for Buying Policies Online
The Insurance Regulatory and Development Authority of India (IRDAI) is proposing to simplify the process for the e-verification of know-your-customer (KYC) details for those buying insurance policies online. Among various amendments, the IRDAI seeks to change e-insurance policy issuance regulations to allow single factor authentication through one-time password (OTP). So far, the June set of regulations, which become effective from October, has recognized e-authentication (through OTP) only if the policyholder uses Aadhaar-based e-KYC services.
Moving forward, if a policyholder has an e-insurance account, the IRDAI recommends in its draft proposal to allow for the sale of insurance products using OTP authentication, in addition to digital and electronic signatures. For example, the customer could give the bank account number, which will be used for KYC (providing identity and address proof). The bank would then authenticate the details and send an OTP on the customer’s registered mobile number to complete the verification. IRDAI has opened the draft for suggestions till 12 September.
Finance Ministry Proposes Railway and Union Budget Merger, Advance Parliament Presentation to January
India’s Ministry of Finance is working on a plan to reorient the national budget-making exercise by including the railway budget in a departure from the 92 year exercise when the railway budget was first formulated. The new budget will also remove the distinction between plan and non-plan expenditure, which will be replaced by revenue and capital differentiation, as per the recommendations of the Expenditure Management Commission and the C Rangarajan-led committee. Moreover, if the Goods and Services Tax comes into effect from April 1, 2017, it will drastically change the revenue calculations of the budget, requiring additional structural change.
The Finance Ministry has also sought to advance the budget presentation to January from February to ensure the budget preparation is completed before the financial year begins. This enables government ministries to activate their plans without needing parliamentary approval. A government panel, headed by Shankar Acharya, is expected to submit its feasibility report on changing India’s financial year format from the current April-March format to January-December by the end of the year.
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