Updated: January 4, 2017 9:45:34 pm
An agreement on the crucial issue of dual control, which envisage a division of control over tax assessees between the states and the Centre under the proposed Goods and Services Tax (GST) and is at the heart of the wrangling between the two sides, remained inconclusive at the eighth GST Council meeting that ended in New Delhi Wednesday. Even as the Council discussed other provisions of the Integrated Goods and Services Tax (IGST) Bill, some states raised their objections on the definition of territory and tax jurisdiction in offshore areas of coastal states and demanded a higher share in the split of GST rate, thereby pushing the deliberations aground.
With the deadlock between states and the Centre continuing over these two issues of definition of territory and dual control, the deadline of April 1 is completely ruled out. Most states said GST can be implemented only from June or July. The next GST Council meeting is on January 16.
Finance Minister Arun Jaitley told reporters, “The IGST law was discussed. It has 11 chapters. The initial 10 chapters have nearly been approved and some issues remain open because they are in the process of being discussed. We will be meeting again because the nature of discussions was inconclusive.”
Jaitley said legal drafts of the supporting legislations of GST have been prepared including the gaps of pending issues. The draft Bills have been sent to the Law Ministry for legal vetting, after which it will be shared with the Council members for approval. Kerala’s Finance Minister Thomas Isaac said the Centre noted the concerns of the states on the issues of territorial waters and need for higher compensation.
“The Centre seems to be in a mood to reconsider some of the stands it is adopting. It is appreciating the position of the states — be it our concerns on compensation or reconsidering its stand on the issue of territorial waters,” Isaac said. Isaac said he is hopeful that the Centre and the states will be able to find a solution on the dual control issue at the next GST Council meeting on January 16. States including West Bengal, Kerala reiterated their demand of retaining exclusive control over tax assessees below the threshold of Rs 1.5 crore turnover. West Bengal Finance Minister Amit Mitra said, “…we could not pass the IGST law because there were things that have been held back. There was no discussion on the question of dual control where the states want that below Rs 1.5 crore, you cannot have dual control.”
States have been demanding tax jurisdiction in the GST regime over high sea sales in offshore regions within 12 nautical miles, whereas Centre claims it to be a Union-administered territory. Jaitley said that the solution to this issue has to be found constitutionally and the solution has to be legally tenable.
Some states including Kerala, Delhi, West Bengal, Karnataka, Meghalaya and Tamil Nadu have asked for a higher share of the GST rate, proposing a 60:40 split in the GST rate between the states and the Centre. So for the peak GST rate of 28 per cent, states are now demanding SGST of 60 per cent of 28 per cent (16.8 per cent), while Centre gets to keep CGST amounting to 40 per cent of 28 per cent, that is, 11.2 per cent. Jaitley said the initial proposition of the division of the GST rates between the Centre and the states was 50:50.
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