The battle between the Centre and State continues over some key provisions of the Goods and Services Tax, with the Empowered Committee insisting that threshold turnover for levying GST be retained at Rs10 lakh and petroleum be kept out of the purview of the new tax regime.
The Empowered Committee of state FMs, which met on Tuesday in the national capital, expressed hope that the GST could be rolled out by April 1, 2016, notwithstanding the hitches.
Speaking to reporters, GST Empowered Committee Chairman Abdul Rahim Rather said that the Centre had written to him suggesting that the threshold annual turnover for levying GST should be increased to Rs25 lakh from Rs10 lakh. The states had in August decided that the threshold should be fixed at Rs10 lakh and had informed that to the Centre.
The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies. The GST Constitutional Amendment Bill, which was introduced in the lok Sabha in 2011, had lapsed and the NDA government will be required to come up with a fresh bill. The Finance Ministry is in the process of preparing a Cabinet note on the GST Bill. The States want that petroleum, alcohol and tobacco should be kept out of the purview of GST. The states are yet to receive the draft constitutional amendment bill from the Centre.
The Empowered Committee also reviewed the revenue neutral rate for the GST, comprising C-GST and S-GST, as suggested by a GST sub-committee. The sub-committee had suggested S-GST rate at 13.91 per cent and C-GST rate at 12.77 per cent.
Rather said the states have made it clear to the Centre that while preparing the draft GST Bill the views of the states should be respected. "I have made it abundantly clear to the Government of India because that will be in the true spirit of cooperative federalism. States should be carried along. If all goes well, the Constitutional Amendment Bill is carried in Parliament by both the houses, I think the 2016 target roll out date is achievable," he added.
The Centre is planning to provide Rs13,000 crore on account of CST compensation to states for dues till March 2010 and is likely to seek Parliament approval for the same in the ensuing Winter session beginning November 24. "States have said that compensation should be constitutionally provided," Rather said.
CST, a tax imposed on the inter-state movement of goods, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT). The centre had then promised the states that it would bear losses due to reduction of CST. As per the compensation mechanism, the Centre would bear 100 per cent of the loss accrued to states in 2010-11 fiscal on account of lowering of CST. However, for 2011-12 and 2012-13 fiscal, the Centre would give 75 per cent and 50 per cent of the losses to the states.
The GST rollout has missed several deadlines because of lack of consensus among states over certain crucial issues on the new tax regime. Hinting that GST Constitutional Amendment Bill may be introduced in the ensuing Winter session of Parliament, Finance Minister Arun Jaitley had said the government was in the final stages of talks with states on the issue.