• GST inches closer to reality as states unite

    The implementation of the landmark Goods and Services Tax inched closer on Tuesday with states unanimously backing it and agreeing that the ceiling rate should not be prescribed in the Constitution Amendment Bill that is awaiting a Rajya Sabha nod.

    The meeting raised hopes that the government and Congress may close the gap in their position over the landmark tax reform. Congress’s insistence on prescribing the 18% rate has effectively stalled the bill, which requires a two-thirds majority that NDA lacks in the upper House.

    “…There was complete consensus that there should be no constitutional cap be cause contingencies might arise as far as the quantum of taxation fixed by the GST council is concerned. It is best left to the discretion of the council,” finance minister Arun Jaitley said after a meeting of the empowered group of finance ministers. All three states -Karna taka, Himachal Pradesh and Meghalaya -that spoke at the meeting of the empowered group of finance ministers were in support of moving ahead on the GST Bill, said sources.

    The states did not mention any need for incorporating the GST rate in the Constitution Amendment Bill.

    Finance minister Arun Jaitley said virtually every state has supported the idea of GST except Tamil Nadu, which has some reservation. “There is one state which has said that even though they have reservations on the GST, they have thought how to make it implementable… Tamil Nadu has offered a few suggestions, which have been noted,” Jaitley said.

    According to the sources, even in case of TN, there was a change in position, and the Centre has sensed that there is “scope for bargaining”, which was not the case earlier. At the end of the meeting, West Bengal finance minister Amit Mitra, who is chairman of the empowered committee of state finance ministers, asked the FMs if there was consensus and the answer was yes, the sources said.

    The states, however, expressed the view that there were several “nuts and bolts” issues which need to be tackled before implementing the ambitious tax reform. The state finance ministers’ panel will be meeting again in Ju ly to discuss issues linked to the revenue neutral rate under GST and the issue of dual control.

    The states, sources said, are demanding a higher revenue neutral rate than the 1718% proposed by the panel headed by chief economic adviser Arvind Subramanian. Similarly, they are demanding greater say in the GST Council with Kerala pointing out that the Centre enjoyed complete veto while the state legislatures were losing their say.

    Further, they want the law to clearly state that the Centre will compensate for all revenue loss for five years – an issue that generated maximum debate. “It is, therefore, necessary that revenue experts and those who have dealt with it in the Centre and the states meet and come to this harmonious system. In the next meeting of FMs a presentation on this will be made, on the assumption that on the one hand we move towards the passage of Constitution amendment and on the other hand these two procedural issues -dual control, and quantum of revenue neutral rate -are finalised in the empowered committee,” said Jaitley.

    The government aims to introduce the GST Constitution Amendment Bill in the Rajya Sabha in the monsoon session of Parliament. The recent RS polls have provided some muscle to the ruling party to get the bill approved.

    “As far as future roadmap is concerned the timetable really is that we will try and see that the Constitution amendments are approved in the monsoon session, and therefore, by the end of the year we must have the CGST and SGST legislations in place.Thereafter, the IGST will need to be passed by the Centre also. The draft of these legislations have been circulated,” Jaitley said. Reshad Jones Authentic Jersey

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