The prospect of the Goods and Services Tax (GST) Bill becoming a reality brightened on Tuesday with an overwhelming numbers of States, except Tamil Nadu, lending their support to the proposal at the Empowered Committee of State Finance Ministers.
The Bill aims at one of the biggest tax reforms in Independent India by overhauling the indirect tax regime and subsuming a number of federal and State levies and bind the Indians into a customs union of sorts.
“The Bill has been virtually supported by most of the States barring Tamil Nadu which has some reservations,” Finance Minister Arun Jaitley told reporters after the meeting attended by 22 States, adding all the States gave their “detailed views on the GST itself. Virtually every State has supported the idea.”
Jaitley said, “Tamil Nadu has made some suggestions that have been taken note of.” The Constitutional Amendment Bill needs to be backed by at least half the total number of States.
However, in Delhi, Tamil Nadu Chief Minister Jayalalithaa on Tuesday threw a spanner in the Centre’s moves to push the GST Bill in the forthcoming Parliament Session. In a memorandum submitted to Prime Minister Narendra Modi, she reiterated her stand that the GST Bill would create a huge revenue loss for manufacturing States like Tamil Nadu.
“GST impacts the fiscal autonomy of States like Tamil Nadu... Expect big revenue loss for a manufacturing State like Tamil Nadu,” Jayalalithaa said in the memorandum, urging the Prime Minister to accept the amendments brought by the AIADMK when the Bill was passed in the lok Sabha.
“A number of concerns of Tamil Nadu need to be addressed by the Centre on GST. Petroleum products must be kept out of GST,” the memorandum added.
When the GST Bill was passed in the lok Sabha last year, Deputy Speaker Thambidurai objected vehemently, raising the concerns of the State.
The major concern of AIADMK was that manufacturing States like Tamil Nadu would suffer a huge revenue loss as the GST Bill proposes taxing at the last point.
On several occasions, Jayalalithaa said that the GST Bill would take away the State’s right to tax the companies engaged in manufacturing there.
One of the amendments moved by the AIADMK was to provide more years as compensation period on the possible revenue loss.
After passage of the Bill in the lok Sabha, AIADMK leaders had categorically said that the party would object to the Bill’s passage in the Rajya Sabha.
In Kolkata, Jaitley maintained, “there has been a complete consensus on no constitutional cap as exigencies may arise in future to revise the rates.”
The Congress had offered to back the Bill provided the Government agreed to cap the tax rate at 18 per cent besides creating an independent mechanism to resolve disputes on revenue sharing between States.
Jaitley, however, shot down the demand to write a cap for the GST.
Meanwhile, hailing the general agreement over the Bill, Bengal Finance Minister Amit Mitra, who chaired the closed-door meeting of State Finance Ministers, said the exercise would facilitate economic reforms.
He added that Chief Minister Mamata Banerjee had extended her support to the Bill soon after she came to power.
Though no deadline was given for the introduction or passage of the Bill, insiders said it could be tabled as early as the Monsoon Session.
After the Bill is passed, the States will be able to draft their own Bills based on the model Union law, albeit with minor variations that may include “State-specific exemptions.”
There will be provisions for inter-State movement of goods after the Centre and the States approve the integrated GST law.