The Centre’s plan to introduce the Constitution amendment Bill for rolling out the Goods and Services Tax (GST) in the current Parliament session hit a hurdle on Thursday with the states “unanimously” rejecting the draft Bill.
After several rounds of negotiations — one in the afternoon and one till late night — with finance minister Arun Jaitley on Thursday, there was no clarity yet on the issue and a meeting would be held in a “week’s time” to take the negotiations forward, said a source close to the development.
The Empowered Committee (EC) chairman and Jammu and Kashmir finance minister Abdul Rahim Rather, however, said that “some headway” has been made in resolving thorny issues.
Earlier during the day, cutting across the party lines, states rejected the draft Constitutional (122nd Amendment) Bill, 2014, while reiterating their demand of keeping petroleum products out of the new tax regime.
“There is no consensus between the Centre and states on these three things (compensation issue, petrol tax and entry tax). The discussed and has decided to reiterate its recommendation and the government of India will have to respect the view of the states… It is a unanimous decision,” Rather, had told reporters after the EC meeting. The EC, at its meeting on July 3, had recommended that petroleum products and entry tax should be kept out the ambit of the GST while the mechanism for GST compensation should be made a part of the Constitution amendment Bill.
However, the Centre’s draft has included both petrol and entry tax in the GST Bill while rejecting the states’ demand of providing for compensation mechanism in the Constitution. Later during the day, state finance ministers met the finance minister, though that meeting remained inconclusive. Jaitley then met a select group of ministers — J&K, Punjab and Gujarat —late in the evening to cobble up a consensus.
Official sources said that the Centre has assured states that they will be compensated for all possible revenue loss in whatever form they want in an attempt to bring states on board. “It is evolving a mechanism for resolving the concerns of manufacturing states like Gujarat and Maharashtra” while it is confident of garnering enough support for the proposal from all the BJP-ruled states, a source said.
The Centre is also learnt to have told the states that the language of the Bill has been derived from the first minutes of the Bhubaneswar meeting of the EC and “therefore there is no reason for disagreement now”. The Bill has to be passed by two-thirds majority of both the Houses and by the legislatures of half the states.