1. Centre retains veto power in GST council

Centre retains veto power in GST council

In the proposed GST council, which will have constitutional backing, the Union finance minister will exercise veto power.

By: | Published: December 16, 2014 5:06 AM

In the proposed Good and Services Tax (GST) council, which will have constitutional backing, the Union finance minister will exercise veto power.  While the Centre is making last-ditch efforts to get states on board for tabling the constitutional amendment  bill for GST in the current session, it has introduced this provision in the Bill, which runs counter to the states’ demand for equal say in the council.

The Constitution (122nd Amendment) Bill, which finance minister Arun Jaitley is planning to table in Parliament in the winter session, has proposed that most contentious matters relating to tax rates, exemptions, threshold limit for inclusion of dealers, sharing of Centre’s tax share of inter-state trade and inclusion of various taxes and cesses within the proposed unified indirect tax shall be decided by the GST Council.

The council will also decide any special provision for the north eastern states, J&K, Himachal Pradesh and Uttarakhand that enjoy excise duty exemption. It will recommend how to share the Centre’s tax receipts from interstate trade, from which manufacturing states like Gujarat and Tamil Nadu have been demanding an upfront cut.

What is interesting is that without the consent of the finance minister, no decision can be taken at the Council even if all other states come together.

State finance ministers led by J&K minister Abdul Rahim Rather, who met Jaitley on Monday, have brought this to his notice, sources said.

As per the Bill, every decision of the council will be be taken by a majority of not less than three-fourths of weighted votes (75%) of the members present and voting.

The Centre’s consent is essential for passing any resolution as it carries a weight of one third (33.3%) of the total votes, while the votes of all states taken together account for two thirds (66.6%).

State ministers discussed with Jaitley their demand for excluding petroleum products and municipality taxes from GST and requirement for an independent constitutional mechanism for compensation for five years. The meeting was still on at the time of going to press.

The finance ministry says a broad agreement has been achieved with states on most of the issues concerning GST and that the new tax regime would be rolled out from April 1, 2016.

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