It seems the government may at last not be able to roll out the much-vaunted goods and services tax (GST) next financial year, with discussions between the Centre and states showing no signs of consensus.
On December 6, the states will be meeting here to discuss the issue all over again. This implies that key issues like what taxes would fall under the GST ambit are yet to be agreed upon.
Making matters worse, the states would be relooking at issues that have already been resolved, like purchase tax, a Union finance ministry official told FE. The official expressed concern over Constitutional Amendment Bill, a key issue to be resolved for the rollout of GST, not even figuring on the agenda this time around. ?The constitutional amendment is not even on the agenda of this meet. This has rendered useless the discussions and decisions on GST that have been taken till now,? the official said.
Among other things lined up for discussions during the meet, the issue of compensating the losses incurred by states due to the proposed reduction in central sales tax (CST) from 4% to 2% would be taken up. The CST, a levy on interstate transfer of goods and services, is being reduced with the ultimate aim of bringing the figure to zero.
Once in place, whenever, the GST would subsume indirect taxes like excise duty and service tax at the central level and VAT at the state level, besides local levies.
For now, the Centre’s proposal for a GST Council to effect changes in GST besides setting up Dispute Settlement Body as part of the Constitutional Amendment Bill are yet to be ratified by some states.
This is crucial to the implementation of GST as under the current scheme of things the Centre cannot impose tax beyond manufacturing and states cannot levy a service tax.
A draft of the Constitution Amendment Bill given to the states by the Centre suggested GST Council should be presided over by Union finance minister with representatives from states as its members. But states raised objections to this saying it would give veto power to the Union finance minister. The Centre then provided another draft bill to states suggesting that changes in GST would be made only if there is a consensus on those issues in the council. However, some state finance ministers did not agree to this suggestion also and proposed an alternative model, in which they suggested the current empowered committee of state finance ministers be enlarged and the Union finance minister be made its chairman to serve the purpose of the council.