PM Narendra Modi-led NDA government moved one step closer to getting consensus on the Goods & Services Tax (GST) Bill on Tuesday. Virtually all states have supported the idea of GST except Tamil Nadu which has “some reservations”, Finance minister Arun Jaitley said after a meeting of Empowered Committee of state FMs on the long awaited indirect tax reform.
“Virtually all the states have supported the idea of GST today barring Tamil Nadu which has expressed some reservations. TN has offered a few a suggestions which have been noted by the committee,” Jaitley said.
Jaitley hopes to bring the Constitutional amendment in the monsoon session of Parliament. Government plans to roll out GST from April 1, 2017. “The first thing which will have to be done is to pass the Constitutional amendment which has to be then ratified by the states. Then Parliament will have to pass the CGST Bill and states the SGST Bills,” he said.
Tamil Nadu CM Jayalalithaa meets PM Modi:
Separately, Tamil Nadu CM J Jayalalithaa met Prime Minister Narendra Modi and presented him a memorandum listing key demands of the state government on various issues.
In the memorandum Jayalalithaa also said that the centre should accept AIADMK’s amendments to GST Bill.
Record attendance by state CMs:
The meeting was attended by Finance Ministers of 22 states including West Bengal’s Amit Mitra as well as Chief Ministers of Arunachal Pradesh and Meghalaya, deputy CM of Delhi and senior officials of seven others.
Stating that this was a record attendance of FMs, Jaitley said that every state has given detailed views on GST.
Chairman of GSTN and Revenue Secretary Hasmukh Adhia were also present.
Development on contentious issues:
On the contentious issue of the Constitutional cap on the GST rate, the finance minister said: “There is a complete consensus on that, there should not be any such ceiling as exigencies may arise in future. Now it is left to the GST council.”
On the issue of additional 1 per cent tax as demanded by the producing states, he said the Centre was flexible on the matter. As GST is a consumption-based tax, the producing states had been demanding this extra tax.
Some key takeaways from the meeting of state CMs:
All purchases made online will attract a uniform Goods and Services Tax, likely to take effect from April next year, according to the model GST law approved by state finance ministers today.
The tax, in lieu of local levies, will be imposed at the first point of financial transaction. This clears the air on applicability of GST in e-commerce in cases where goods were being sold in one state but was being bought in another state.
The model GST law, which has 162 clauses and 4 schedules, has also suggested a jail terms of up to 5 years and fine for violation of the provisions of the statute.
What Jaitley said:
Jaitley said that there was “no deadline as such” for the implementation of the Goods and Services Tax which aims to subsume a string of state and central level levies.
Jaitley said the states’ fear of loss of revenue for the first five years had also been addressed.
“The Centre will compensate the loss and there should not be any cause for worry,” he said.
Commenting on the meet, Harishanker Subramaniam, National leader – Indirect Tax, EY said, “The two day meeting of the Empowered Committee with Finance Minister’s participation is a welcome move, the fact that all States and Union Territories attended indicates the seriousness on GST. The agenda was around draft model GST law, IT preparedness, Revenue Neutral Rate, Dual administration control. The FM’s statement that virtually all states support the idea of GST with Tamil Nadu expressing some reservations augurs well for an early consensus and roll out.”
“The draft GST Model law is in public domain for stakeholder consultations which is an important milestone. This will provide the much needed window for stakeholders to understand the nuances of the law and provide their comments. The next important step will be the passage of Constitution Amendment Bill in monsoon session to set the ball rolling for GST implementation by April 2017,” Harishanker Subramaniam added.
Pratik Jain, Leader – Indirect Tax at PwC India called the revised draft a significant improvement over the first one. “Overall, the Model law for public debate moves us closer to GST, hopefully from April 1, 2017. Lot of hard work seems to have been put up in arriving at broader consensus with the States. Industry would need to analyse the law with specific reference to their business and set the ball rolling in terms of preparation. Hectic times ahead for industry. All eyes on the Monsoon session now for passage of constitutional amendment bill,” he said.
(With inputs from PTI)