Arun Jaitley meets state FMs on GST: All states oppose GST cap, his message to Congress

Cong wants rate ceiling specified; Govt hopes to push Bill in monsoon session

Written by Subrata Nagchowdhury , Anil Sasi | Kolkata/new Delhi | Updated: June 15, 2016 4:54 pm
gst bill, gst, Arun jaitley, jaitley, finance minister, narendra modi, gst bill, gst news, gst, goods and service tax, gst states, gst west bengal, gst tamil nadu, business news, india news Union Finance Minister Arun Jaitley along with finance ministers of all states during a conference on GST Bill. (Source: Express photo by Partha Paul)

Tamil Nadu held out at a key meeting of state finance ministers Tuesday to roll out a nationwide goods and services tax (GST) regime next year and Union Finance Minister Arun Jaitley said its suggestions have been noted. He said states are unanimously against the idea of specifying a GST ceiling rate in the Constitution amendment Bill which the government hopes to push through in the monsoon session of Parliament.

A cap of 18 per cent on the GST rate is one of the three main demands of the opposition Congress which has made a strong pitch for the ceiling rate to be specified in the Bill itself.

The Bill is stuck in Rajya Sabha where the ruling coalition lacks numbers.

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Speaking to reporters after a meeting of the empowered committee of state finance ministers where 22 states were represented, Jaitley said: “Every state has given its detailed view on the GST. Virtually every state has supported the idea of GST. One state (Tamil Nadu) has said they have reservations on GST and have offered a few suggestions on how to make the GST implementable. We will look into it.”

Tamil Nadu Finance Minister K C Veeramani told The Indian Express: “We are opposing GST. We have given our objections in writing to the empowered committee.”

The empowered committee also approved a model GST law under which the tax will be imposed at the first point of financial transaction and online transactions too will attract a uniform GST. The model GST law, which has 162 clauses and 4 schedules, has also suggested jail terms of up to 5 years and a fine for violation of provisions of the statute.

The GST aims to integrate the country into a common market by removing barriers to trade that exist across states. It will subsume all indirect taxes of the Centre and states, including excise duty, value-added tax, service tax and octroi.

At Tuesday’s meeting, consensus was, however, elusive on two contentious issues — the revenue neutral rate under GST (a tax rate at which states do not lose revenue) and the issue of dual control (businesses having to file details of sales transactions with both the central and state agencies). Both these issues will be discussed at the next meeting of the empowered committee in July.

Congress-ruled Karnataka’s PWD Minister H C Mahadevappa and Kerala’s Finance Minister Thomas Isaac were among those who attended the meeting.

Concerns flagged by Tamil Nadu at Tuesday’s meeting include the potential revenue loss for states and the issue of “loss of fiscal autonomy” after the transition to GST.

Punjab Finance Minister Parminder Singh Dhindsa said issues like compensatory mechanism for GST and dual control will continue to be deliberated but “we have agreed to go ahead with GST… In fact, every participant today agreed to the basic idea of GST implementation”.

Jaitley said he has assured states that any notional losses suffered by them on account of a switch to the GST regime will be compensated by the Centre. He also said that the government is flexible on the demand for scrapping a 1 per cent additional tax on inter-state sale, adding it will lead to a higher outgo from the Centre to producing states.

He said states had a unanimous view against specifying the cap in the Constitutional amendment Bill. “There is complete consensus on the fact that there should be no constitutional cap because contingencies might arise in future as far as the quantum of taxation fixed by the GST council is concerned.”

“In the first five years, if there is loss in revenue as far as any state is concerned, the liability of the Centre is to compensate for the revenue and I have categorically stated that we have undertaken it and, therefore, the state should not have any doubt.”

“There is, however, no deadline on GST implementation. But we can say that a broad consensus on its implementation has been achieved and we are moving with positive intent.”

He said it will be essential for the Constitution amendment Bill to be passed in the monsoon session. The passage of this Bill will have to be followed by a ratification of the Bill by a majority of states. After this, the central GST and the integrated GST legislations will have to be passed by Parliament and state GST laws by states by the end of the year.

At the next meeting of the empowered committee, central government officers are expected to make a presentation on the possible revenue neutral rate calculations. A decision is also expected on sorting out the dual control issue after presentations by tax experts.

“Since the administration of state and central taxes will merge into one, there is need to bring about a seamless system. It should not lead to conflict and the process should work out harmoniously between the Centre and the state,” Jaitley said.

West Bengal Finance Minister Amit Mitra, who heads the empowered committee, said the panel will again meet in the second week of July to discuss these two issues.

“On the issue of dual control, it has been agreed that up to Rs.1.5 crore, states will administer the taxes and after that threshold, a seamless process will have to be worked out,” he said.

Mamata Banerjee has extended full support for GST… All states supported GST today. Certain reservations of Congress-ruled states are issues that belong to the operational domain of GST and can be discussed and sorted out,” he said.


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  1. K
    Jun 14, 2016 at 2:53 pm
    There in lies the genius of the creators of the consution.
    1. P
      Peeyush saraf
      Jun 15, 2016 at 12:36 pm
      Central gov should take fast action over ping gst over all it will be great revolution
      1. G
        Jun 14, 2016 at 10:52 am
        What is the legality of the PIMPowered Committee of Finance Ministers of states who are nothing but illegal money generators for their respective political parties.
        1. A
          Abbas Rumani
          Jun 14, 2016 at 2:11 pm
          Rajesh Go and see the Raj Sabha and Lok Sabha Proceding you will know how they did it. Come in well of house. That is what these parties do. Secondly since this bill is amendment to consution they need 2/3 majority to p it would not work with simple majority.
          1. A
            Jun 14, 2016 at 10:38 am
            Then why it took all the years and BJP was dead against. What made u think otherwise, a new wisdom or true Indianess
            1. A
              Jun 14, 2016 at 1:00 pm
              We are at freedom to express our thoughts. However I do recall that an election was held and this Government came in with a thumping majority. This is a fact irrespective of political affiliations or biases. Its so easy to be forgetful about the corruption which continues to haunt us even today due to its deep rooted nature. You have extreme voices across India who are best ignored. These labels of communal, secular are so easy to pin.
              1. A
                Jun 14, 2016 at 12:48 pm
                great job. I hope the GST now pes. Maybe useful to further increase the likelihood of it happening by bringing the general public on board in terms of understanding why it has far reaching implications for INDIA
                1. V
                  Jun 15, 2016 at 4:50 am
                  Please understand that the shop keepers are not paying GST from their pockets.They are collecting it from consumers and paying it the;br/gt; If you add up all the taxes of the Centre and states, including excise duty, value-added tax, service tax and octroi. In addition to the time wasted to be in the vat office and the effort needed to get your job done quickly GST is god;br/gt;In many countries after the introduction of GST, Tax collection have gone up and tax evasion has come down because it is not worth devising innovative schemes and paying and paying the big money for it.Moreover one will always slip up somewhere and the cat will be out of the;br/gt;Secondly whatever GST is paid can be claimed back.May be Mr.Jaithly should sell the pros of GST to the indian;br/gt;The most important feature of GST is that any transaction, from it's origin to the hands of the customer can be followed.That means keeping account A and account B will be nearly impossible and forget black market or overcharginglt;br/gt;Thirdly, it is possible to cost a project.There will be no surrprises or inducements and everything can be done on line and tax returns, if correct are automatic and might take 10 -30 days depending on the speed of the Tax server.
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