Two panels led by revenue secretary to the central government Sumit Bose set up last month to advise on GSTs design and states compensation will miss their December 31 deadline but will meet on January 6 to take a view on the twin issues of Centre-state dispute.
Modi told FE the panels chaired by Bose are looking into the details of the proposed GST which are not covered by the Constitution (115th Amendment) Bill, 2011. It is a two-page Bill that deals only with the broad structure of the harmonised tax regime. Review of GSTs design and compensation to states do not warrant major revisions to the Bill, said Modi.
The pending Bill proposes concurrent taxing powers to both the Union and state governments and recommends setting up of a GST Council and a GST Dispute Settlement Authority. Modi said once the Parliamentary panel gives its recommendations, the Union government would table the Bill incorporating suggestions.
However, BJPs Yashwant Sinha, who heads the Parliamentary Standing Committee on Finance said earlier this month at the Express Groups Idea Exchange programme that the House committee has suspended discussions on the constitutional amendment Bill saying the government opened fresh negotiations with state ministers on the Bill that was before the Parliamentary Committee. Sinha said the finance ministry has been asked to clarify if fundamental changes would be made in the design of GST. The ruling UPA coalition, that is a minority in the Upper House and has only a thin majority in the Lower House of Parliament, needs outside support including from the BJP for major reform measures. More so for a Constitutional amendment.
Modi, who also belongs to BJP, declined to comment on Sinhas statement saying the state finance ministers panel on GST does not interact with the parliamentary committee.
As for the design of GST, the things to be decided include the threshold (in terms of turnover of businesses) where the tax would kick in, central and state GST rates, a common list of exemptions with a small window for state-specific alterations etc.
At the scheduled January 6 meeting, officials of the Union government and state ministers are expected to give final shape to a consensus on GSTs structure and compensation to states for their reduced revenue collection from central sales tax (CST) on goods.
CST, which is levied on the movement of goods from state to state, was lowered from 4% to 3% in 2007-08, and further to 2% in 2008-09 after the introduction of Value Added Tax (VAT). States were given a compensation of Rs 6,393 crore for 2010-11 but they insist on getting Rs 12,666 crore more for the period. The finance ministry lowered compensation to states that raised their VAT from 4% to 5%, taking into account the revenue thus raised.