GST Council on Friday made a ‘reasonable headway’ on supporting legislations for GST but the critical issue of administration and control of tax payers still hangs in fire.
The panel, which met for the seventh time since the Constitutional Amendment to replace central and state taxes with a Goods and Service Tax was approved in mid-September, tweaked the periodicity of payment of compensation for loss of revenue to states for implementation of GST to bi-monthly instead of previously decided quarterly payment.
Also, the Council decided to create the kitty for the compensation ‘from any other tax’ besides the cess on luxury and sin goods it had previously approved, as states saw revenues being dented by slowdown in economic activity and resultant tax collections following demonetisation.
The GST Council will meet again on January 3-4 and take up the issue of which part of tax payers should be controlled by the Centre and who should be governed by the states after a single tax will replace levies like central excise, service tax and VAT.
The dual control is also part of the Integrated-GST legislation that Parliament needs to pass before the new regime is rolled out.
But for this stumbling block, mirror legislations of Central-GST and State-GST, that have to be approved by Parliament and state assemblies respectively, neared finality with most clauses agreed upon.
Finance Minister Arun Jaitley said the law to provide for compensation to the states for loss of revenue was also approved by the GST Council at its two-day meeting which ended today but a final draft with legal language would be approved at the next meeting.
“I am trying my best,” he said, when asked about the April 1 rollout schedule. “I am not going to bind myself with anything. Our effort is to do it as quickly as possible and I think we are making a reasonable headway.”
Three consecutive meetings of the GST Council have not been able to take up the issue of dual control. Some states like West Bengal and Kerala want a minimum turnover criteria be fixed to decide who control which assessee, a proposal the Centre is not agreeable to because states lack expertise on levies like service tax.
“If you ask me what are the principle residuary items left, the main item of course is the IGST and dual empowerment issue. The second is the legally vetted language which will be placed in the next meeting on January 3-4,” Jaitley said, adding that the Council will take up items in each tax bracket after that.
While the compensation was earlier proposed to flow from the cess to be levied on luxury cars and sin goods like tobacco, demonetisation has led states to believe that more number of them would need support to make up for the revenue loss arising from GST roll out.
It was previously thought that 4-5 states will need compensation for revenue loss, the economic activity being impacted by demonetisation of 500 and 1000 rupee notes would necessitate support to even more states because of loss in tax revenues.
According to sources, the ‘source of compensation fund’ part of the law is being redrafted to say that compensation amount would be raised from cess and ‘any other taxes as the GST Council decides’.