Many states want more time and amount; Jaitley still says he’s sure of Bill passage in coming weeks
The constitutional amendment Bill on GST has this: “An additional tax on the supply of goods, not exceeding one per cent, in the course of inter-state trade or commerce shall be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend.”
Business Standard has learnt from government sources privy to discussion in the empowered committee meeting on Wednesday that the time period for the additional tax could be extended, if a two-thirds majority of the empowered committee agrees. It is learnt a number of states want an increase in the timeline to a yet undecided number of years and some are willing to push for voting in the committee.
Separately, in a press briefing, Kerala’s finance minister, K M Mani, who is chairman of the empowered committee, said at the meeting, some states had expressed concern over the Central Sales Tax compensation and asked they be compensated for 10 years or beyond that for the revenue loss from a GST.
He added that manufacturing states such as Maharashtra and Gujarat have demanded they be allowed to levy two per cent additional tax over and above the state GST rate, though no decision had been taken on this. For a decision, this provision also requires a two-third majority in the committee.
If the Centre and the states do not agree on the rate or schedule of the additional tax, it is likely to disrupt the planned rollout date of GST, sources said.
After the meeting in the morning, Union finance minister Arun Jaitley said the constitution amendment Bill, introduced in Parliament’s winter session, would be passed in the current session. And, that he remained optimistic on introduction of GST, creating a nationally unified market and removing trade barriers in the form of cascading effects of taxation, from April 1, 2016. “In view of the near-unanimous support of states, that it is going to be a win-win situation for all, we will go ahead with the amendment in the current session of Parliament. I will be giving notice, so that it can be taken up for discussion in the Lok Sabha in the next couple of days.”
Jaitley also said some states had asked for minor tweaks to the language of the constitutional amendment. Sources later said these pertained to replacing the word ‘may’ with ‘shall’ in the phrase, “The Centre may compensate the states…”. “The finance minister explained that in legal language, ‘may’ is as good as ‘shall’,” said a government official.
The Centre and states are also working on a new revenue-neutral Rate, currently pegged at 27 per cent. RNR is one at which there will be no revenue loss to states after GST implementation. The recalculation is necessary as at present it does not take into account the taxation of petroleum products, as also the one per cent additional tax which states can levy as part of the GST Bill. Jaitley said the empowered committee did not discuss RNR.
The Delhi-based National Institute of Public Finance and Policy (NIPFP) has been asked to rework the previously proposed RNR of 27 per cent, as this was based on the figures of 2010. NIPFP is expected to give another report on the GST rate by May 7-8, when the empowered committee is scheduled to meet in Thiruvananthapuram. The new RNR would be based on the data available for 2014-15.
Among the states, Tamil Nadu voiced reservation over a Bill being introduced in Parliament before a consensus on actual rates and tax bands is evolved through the empowered committee. “(This) is not acceptable to us,” said its minister for commercial taxes and registration, M C Sampath.
Haryana’s finance minister, Abhimanyu, urged the Centre to increase the compensation period from five years to 10 years to make good the losses to manufacturing and surplus producing states. West Bengal objected to the mechanism of taxation of tobacco in the amendment Bill. While tobacco and its products have been included in the GST, the Centre is allowed to levy excise duty, States would not be able to levy higher tax than the GST on these goods.
Source : Business Standard