Centre, states agree upon contours of GST laws but April deadline looks difficult
NEW DELHI: Making further progress towards the goods and services tax regime, the Centre and states broadly finalised the contours of the law that will govern this levy. But states raised a few more issues, even as the contentious one on tax administration remained unresolved. A number of states said the April 1 deadline to roll out GST looked difficult to meet and that a realistic target could be June or July.
Still, the eighth meeting of the GST Council reached consensus on most of the provisions of integrated-GST, the law for interstate sales, and other issues related to the central GST and state GST previously left undecided.
Parliament will need to pass the I-GST and central GST laws before the tax system can be implemented. States will need to pass state GST rules. The council will meet on Wednesday to deliberate the issue of administration of the tax, the issue of dual control.
“April 1 rollout of GST definitely not possible,” said Thomas Isaac, Kerala’s finance minister. Gujarat finance minister said it could even be September.
The West Bengal finance minister said the council did not even “touch” on the issue of dual control, which was fundamental to the GST rollout, and that slabs on 1,500 items were yet to be decided. “We cannot have a GST that is non-sustainable, flawed and states will not give up their rights,” Amit Mitra said, adding that the “demonetisation tsunami” derailed the process.
Delhi Deputy Chief Minister Manish Sisodia said there may be a one- or two-month delay from April 1.
The finance minister in BJPruled Haryana, Abhimanyu Singh Sidhu, said the draft of the model integrated-GST was “more-or-less finalised”. He was also optimistic that the dual control issue would be resolved on Wednesday.
“Realistically speaking, it is a difficult deadline (April 1). But I would still not say it is absolutely unlikely. I still see it as a possibility,” he said.
Six sectors including banking and insurance, IT and telecom, and civil aviation made presentations before the GST Council, pressing for a single registration either with Centre or states under the new regime.
The largely settled issue of compensation was raised again as some states argued that a Rs 55,000 crore fund proposed via the cess on luxury and sin goods may not be sufficient.
States that aren’t ruled by the BJP said post demonetisation, their revenue loss would go up and states could together lose as much as Rs 90,000 crore. Mitra said West Bengal’s tax revenue grew 11% in November 2015, but in November 2016 it fell 2% due to demonetisation.
“Every state said its taxes have presenfallen by 30-40% … Today many states would need compensation. If you need Rs 80,000-Rs 90,000 crore, instead of Rs 55,000 crore, where will it come from? That’s a double whammy. States are interested that the Centre should stick to its constitutional commitment,” Mitra said. If a bigger corpus is to be built, the cess will have to be levied on more goods.
States also raised the issue of taxation right over high seas, claiming that in line with the provision for sales tax or VAT they had the right to levy GST up to 12 nautical miles offshore.
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“All the coastal states, irrespective of parties, combined in saying that we must have 12 nautical miles within the state jurisdiction, whereas the draft I-GST law was looking at having taxation rights with the Centre,” Mitra told reporters. Chairman of the Council and Union Finance Minister Arun Jaitley decided to seek legal opinion on its constitutional validity.
The GST Council will take up the issue of tax administration on Wednesday. States indicated they are unlikely to give up on their demand of exclusive jurisdiction over assesses with turnover up to Rs 1.5 crore. Kerala Finance Minister Isaac said states will stick to the demand. The Centre is keen on a vertical division of all assesses between it and states.