GST Bill passage chances rise as states lend willing ear

By: | Published: July 29, 2016 6:38 AM

Even as the states have been assured of five-year full compensation for any revenue loss from the goods and services tax (GST) and a well-balanced GST Council, some political parties want more explicit assurance that they don’t lose their revenue powers in the proposed regime, reports fe Bureau in New Delhi.

GST, GST Bill, GST in India, GST news, Goods and Services Tax, GST international lessonsBut the passage of the Bill in the Rajya Sabha next week still looked possible.

Even as the states have been assured of five-year full compensation for any revenue loss from the goods and services tax (GST) and a well-balanced GST Council, some political parties want more explicit assurance that they don’t lose their revenue powers in the proposed regime, reports fe Bureau in New Delhi. While a general consensus in favour of the GST Constitutional Bill has emerged among states, these parties want a solution to Centre-state issues to be found outside the scope of the Bill. But the passage of the Bill in the Rajya Sabha next week still looked possible.

Leaders from the Congress, which had blocked the Bill, indicated that talks were now going in the right direction. The smaller parties, which have raised some issues during talks with the government, are likely to support the Bill when it is put to vote. Importantly, the GST Bill seeks to give states the power to tax services while they get only the proceeds of the tax currently as per the finance commission formula.

“The Bill is only meant for imposing a tax. It does not deal with Centre-state relations. So a resolution has to be found outside the Bill and the government has to come out with an assurance,” CPI(M) general secretary Sitaram Yechury said after a meeting with finance minister Arun Jaitley. The GST should not lead to states having “to come with a begging bowl to the Centre, place them at the Centre’s mercy,” he said. Yechury said he had conveyed to Jaitley that states would not be able to impose any cess even during an emergency or natural disaster once the GST is brought in.

The finance minister met leaders from opposition parties, including the Congress, Samajwadi Party, JD(U) and Trinamool Congress.

The empowered committee of state finance ministers, which met in New Delhi on Tuesday, agreed that the states shall get full compensation for any loss of revenue in the initial five years of the GST regime. States have also voted against a GST rate cap in the Constitution. On its part, the Centre has agreed to drop the plan to have a 1% extra origin-based tax on interstate trade to help “manufacturing states” which fear loss of revenue. West Bengal finance minister and chairman of the panel Amit Mitra also said that the state finance ministers conveyed to the Union finance minister that businesses with turnover of Rs 1.5 crore and below will be taxed only by states and not by the Centre.

The Congress had almost agreed to a formula put forth by the government during inter-party discussions over the last few days that instead of putting the GST rate cap (18%) in the Constitution, a ceiling could be specified in the GST Acts of the Centre and states.

In the Rajya Sabha, whose current strength is 244, NDA has only 72 members. For the Constitutional amendment Bill — aimed at allowing states to tax services and the Centre to tax transactions beyond the factory gate and creating the powerful GST Council — to sail through the House, two-thirds of the members should vote in its favour. Several major non-NDA parties like the SP, NCP, Trinamool Congress, JD(U), etc, are inclined to support the Bill along with many independents. Prime Minister Narendra Modi on Thursday spoke to SP leader Ram Gopal Yadav in Parliament, seeking the party’s support for the Bill.

The BSP, which had earlier expressed readiness to support the Bill, may waver with the current backlash in Gujarat over Dalits issue. And the AIADMK has remained wary of GST despite the Centre reaching out to the party several times as it reckons that being a state with a robust manufacturing industry, it could lose out under the new regime.

 

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