NEW DELHI: The government is likely to accept the parliamentary select committee’s recommendation to compensate states for potential revenue losses for five years, but is set to reject the Congress’ demand for greater say in the GST Council on the grounds that states will get veto power deciding the country’s fiscal policy.
The Congress has been demanding that the Centre should have one-fourth say in the GST Council, the agency comprising state and the union finance minister that will decide on key policy issues related to indirect taxes. The current structure provides for one-third say for the Centre and two-thirds for the states. Sources at the Centre argued that the current structure ensured that states did not have veto power, which would not be the case if the states were given three-fourths say being proposed by Congress.
On the third issue related to withdrawal of the provision that allowed some of the producing states to levy 1% additional tax. Congress party has argued that this will adversely impact consumers as it will have a cascading effect. The sources clarified that the move is to allow states to levy up to 1% tax and will not have a major impact. In any case, this provision would be applicable for two years and had been inserted after several manufacturing states that stand to lose from the rollout of GST insisted on it. “It was a compromise formula to implement GST that has been languishing for a decade. It is better to have GST instead of a perfect GST since it will boost economic growth,” said an official.
The government’s move to push a Constitutional amendment is facing a hurdles from the Congress party even as several regional parties now seem to have come on board after the select committee agreed to accept some of their demands. The select committee, which was set up during the last session, is expected to submit its report on Wednesday.
The Centre is keen to get the Bill passed during the current session since it needs to be ratified by the states and three other laws need to be enacted to meet the April 1 deadline for rollout. A further delay will force the government to postpone the implementation by a year.