The Centre’s Constitution Amendment Bill to implement the proposed goods and services tax (GST) has found little support from the states with even BJP-ruled states like Gujarat, Maharashtra, Rajasthan and Madhya Pradesh flagging several concerns regarding the proposals.
Official sources told The Indian Express that the Gujarat government has raised apprehensions about the implementation of five-year compensation provided for in the Bill for any possible revenue loss arising due to the roll out of GST. Also, it has sought extension of the additional 1 per cent levy on supply of goods in inter-state trade beyond the proposed two years.
Similarly, the BJP-ruled Maharashtra has raised objection to the inclusion of octroi in the new indirect tax regime, along with raising concerns about the proposal of the GST compensation.
“States like Rajasthan, Uttar Pradesh and Madhya Pradesh have also raised concerns about the compensation for possible GST losses. The contention is that the provision has been worded in a manner that the Centre may not be obliged to pay the compensation when the GST is rolled out,” the sources added.
According to the proposal in the Constitution Amendment Bill, “Parliament may, by law, on the recommendation of the GST Council, provide for compensation to the states for loss of revenue arising on account of implementation of the goods and services tax for such period which may extend to five years”.
The Centre has though rebutted the apprehensions, pending states’ concerns, the GST Bill may face significant roadblocks.
The government tabled the Bill in December last year after a series of hectic negotiations with the empowered committee of state finance ministers, touting it as the biggest tax reform since 1947.
It proposed to include petroleum and octroi in the GST while at the same time, not subjecting the petroleum products to the levy of GST till the GST Council decides. In the interim, both the Centre and states will continue to impose their respective tax on petroleum products.
It also sweetened the deal for states like Gujarat and Maharashtra by allowing them the additional levy of 1 per cent which can be extended further if the GST Council decides.
The sources said that the Uttar Pradesh government has raised strong objection to the inclusion of entertainment tax in the ambit of GST while it has sought an understanding as to what will happen to the cases of value-added tax which are in disputes at various forums. Madhya Pradesh has asked for a clarification on the amendments in the state powers in making laws under Article 245 of the Constitution.
The state has claimed that under GST a situation will arise where some states may get extra-territorial decision making powers and this situation has to be avoided.