The possibility of roll out of the Goods and Services Tax (GST) has moved further to September as a new issue has cropped up – the states’ demand for an increased share in the new indirect tax collections, Kerala Finance Minister Thomas Issac said on Wednesday.
“I am not very optimistic about GST rolling in June or July. It is better to move to GST after all the preparations are done. To my understanding it will be implemented September onwards,” Isaac told reporters here after the two-day GST Council meet came to end.
Ruling out the April 1 implementation of GST, after the Day 1 of the Council meet, Issac on Tuesday had told reporters that the rollout of the GST may only be possible by June-July.
The Kerala Finance Minister on Wednesday said that the state GST (sGST) can be passed in the state’s respective budget sesssions or special sessions can be convened, which will make rollout possibile by September onwards.
Raising new issues between the Centre and the states, Issac said that the Council members discussed the four tax slabs under the GST and the states felt that the states and Centre share in the taxes should be 60:40 and not 50:50.
“Four different GST rates have been fixed. Highest bracket is 28 per cent. It is taken for granted that Centre and state share in it will be 50:50.
“Over the years, states’ rights have been curtailed. This presents a historic opportunity to correct the states’ share to 60 per cent and Centre’s share would be at 40 per cent. The states today (on Wednesday) supported this understanding,” Issac added.
Four tax rates of 5 per cent, 12 per cent, 18 per cent and 28 per cent have been decided under the GST regime. These apart, another category of tax between 40 per cent and 65 per cent will be imposed on luxury goods like high-end cars, pan masala, aerated drinks and tobacco products.
With the states now demanding increased share in the indirect tax collections, the crisis of GST rollout has deepened as the other issues of dual control or cross empowerment, which deals with assessee’s jurisdiction and the issue of area of state jurisdiction under integrated GST (iGST) have already created an impasse in the Council.
A number of states are firm that dealers and service providers below Rs 1.5-crore turnover should be entirely under the state’s control.
“We haven’t been able to even touch the dual control issue, which is fundamental to this process,” West Bengal Finance Minister Amit Mitra had told reporters here on Tuesday.
The GST Council meeetings which were progressing well have been impacted after demonetisation dented the states’ revenues by 30-40 per cent.
Mitra had said that states’ tax revenues have fallen around 30-40 per cent owing to the depressive impact of the November 8 demonetisation measure, which has complicated the issue of compensation to states for future losses arising from the GST implementation.
Noting that the compensation fund would, therefore, require to have a much larger corpus of around Rs 80,000-90,000 crore, as compared to the current plan of Rs 55,000 crore, Mitra had also said that the GST Council will now take a call about the Centre taking responsibility for fully compensating states for the loss of revenue.