Aiming for GST roll out by April 2016, the government will move the Constitution Amendment Bill in Parliament within a couple of days, even as compensation and revenue loss to manufacturing states lacked consensus at a meeting held on Wednesday.
Aiming for GST roll out by April 2016, the government will move the Constitution Amendment Bill in Parliament within a couple of days, even as compensation and revenue loss to manufacturing states lacked consensus at a meeting held on Wednesday.
"In view of the near unanimous support of states, that it is going to be a win win situation for all, we will go ahead with the Constitution Amendment in the current session of Parliament," Finance Minister Arun Jaitley said after a meeting with the members of the Empowered Committee of State Finance Ministers on Goods and Services Tax. The Committee Chairman K M Mani said there was broad consensus that the Bill should be passed immediately so that GST can be introduced.
"The Prime Minister promised that early steps will be taken to pass the Constitution Amendment, Bill with priority basis," said Mani, who met Prime Minister Narendra Modi earlier in the day. During the meeting, some states have expressed concerns over the Central Sales Tax compensation and demanded that they be compensated for 10 years or beyond for the revenue loss they will incur while rolling out GST, he said.
Manufacturing states, like Maharashtra and Gujarat, have demanded that they be allowed to levy 2 per cent additional tax over and above the state GST rate, he added. Tamil Nadu said the Centre's proposal for resolving issues concerning new indirect tax regime through a GST Council was not acceptable to it.
"Current proposal of the Government of India to introduce a Constitutional Amendment Bill on GST and then to evolve a consensus on various aspects of GST, especially the actual tax rates and tax bands, etc., through the GST Council is not acceptable to us," said M C Sampath, Minister for Commercial Taxes and Registration, Tamil Nadu. "Broad consensus on the critical issues should be evolved through the Empowered Committee before the enactment of the Bill is taken up," he said.
The GST Constitution Amendment Bill in its present form allows all states to levy 1 per cent additional tax over and above the GST rate to compensate them from the revenue loss. "I will be giving notice (so that it can be) taken up for discussion in the Lok Sabha...in next couple of days," Jaitley said. Jaitley said the Centre and states are trying maintain April 2016 as the target date for GST implementation. "We are quite optimistic about that target."
Minister of State for Finance Jayant Sinha said: "We see no obstacles that will interfere with the April 1, 2016 timeline for GST." The GST bill was introduced in the Lok Sabha in December.
A single rate of GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services to ensure seamless transfer of goods and services. Mani said there is no apprehension among most of the States. "There is general consensus regarding GST implementation. Most of the states welcome it because there is only advantage in passing the GST bill."
The GST legislation, being a Constitution Amendment, will require support of the two-third members of Parliament and thereafter ratification by half of the states. Haryana Finance Minister Capt. Abhimanyu urged the Centre to increase the compensation period from five years to 10 years to make good the losses to the manufacturing and surplus producing states.
States, including West Bengal, Tamil Nadu and Haryana, also raised objections to the mechanism of taxation of tobacco as is there in the GST Constitution Amendment Bill. While tobacco and its products has been included in the GST, the Centre is allowed to levy excise duty, States would not be able to levy higher tax than the GST on these goods.
"Enabling provision should be made for the States to levy higher taxes on tobacco and tobacco products similar to what has been permitted to the Centre," Sampath said. 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 by the GST Council, which will have two-third of its members from states. All decisions in the Council will require 75 per cent votes.
Also all states can levy 1 per cent additional tax over GST to make up for any revenue loss for the first two years. Wednesday's meeting was attended by the finance ministers of 18 states, while other states were represented by officials.
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