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  1. GST Bill: PM Narendra Modi buys peace with Congress; here’s how

GST Bill: PM Narendra Modi buys peace with Congress; here’s how

Amendment makes it legally binding to establish mechanism

By: | New Delhi | Updated: August 3, 2016 6:44 AM
The Centre had initially mooted a dispute settlement authority with adjudicatory powers over the decisions of the GST Council, but it had to drop the proposal even before the Bill was put to vote in the Lok Sabha as states objected to it, saying their fiscal autonomy could be eroded. (PTI) The Centre had initially mooted a dispute settlement authority with adjudicatory powers over the decisions of the GST Council, but it had to drop the proposal even before the Bill was put to vote in the Lok Sabha as states objected to it, saying their fiscal autonomy could be eroded. (PTI)

Ahead of the imminent crucial vote on the Goods and Services Tax (GST) Constitutional Bill in the Rajya Sabha, the government has made it legally incumbent on the proposed GST Council to establish a mechanism to adjudicate disputes arising out of the council’s decisions.

The gesture amounted to going the whole hog in addressing the Congress party’s demand for an autonomous set-up for dispute settlement, although it fell short of specifying whether a judicial mechanism headed by a high court judge, as demanded by the main Opposition party, was on the cards. In this regard, the key difference from the earlier version of the Bill, passed by the Lower House in May last year, and the what is articulated in a notice of amendments circulated to the members of the Upper House on Tuesday is that latter says the Council “shall” set up the mechanism, making it a more definitive and legally binding.

The proposed mechanism would adjudicate “any dispute between the Centre and one or more states, between the Centre and any state or states together on the one side and one or more other states on the other side or between two or more states”, according to the notice.

The Centre had initially mooted a dispute settlement authority with adjudicatory powers over the decisions of the GST Council, but it had to drop the proposal even before the Bill was put to vote in the Lok Sabha as states objected to it, saying their fiscal autonomy could be eroded. The GST Council, which will have wide-ranging powers in the GST regime, will represent the Centre and states in a 1:2 ratio and its decisions will be based on three-fourths majority, meaning neither the Centre nor the states can do without the other. The Congress had opposed the GST Council hearing disputes on its own decisions, saying it would be tantamount to an appellant sitting in judgement.

The notice of amendments to the RS members also dropped a 1% additional origin-based tax and included a definite provision in the statute for compensating states for revenue loss for five years. While Congress leaders like Anand Sharma clearly indicated that the party would support the Bill, stuck in the Upper House for long primarily because of its differences with the government, top leaders of the party including vice-president Rahul Gandhi went into a huddle on Tuesday to chalk out the party’s strategy ahead of the vote. Both the BJP and the Congress had issued whips to their members asking them to be present in the House for the next three days.

The Congress, which dropped its demand for an 18% GST rate cap in the Constitution, is demanding what they call “ring-fencing” of the rate in the GST Acts (Centre, state and interstate GST Acts). Sources said the government is considering this suggestion favourably.

Gr5

Finance minister Arun Jaitley, at a meeting with his state counterparts last week, promised to keep the incidence of tax low while safeguarding the revenue of the states. Jaitley has been meeting leaders of Congress and other parties, including the SP, BJD, Trinamool Congress, RJD and CPI(M), to build a consensus on the passage of the long-pending indirect tax reform bill.

As the Congress with 60 members in the 244-member Upper House is set to support the Bill, its passage now looks almost certain.

While the ruling National Democratic Alliance has 72 members, several major non-NDA parties like SP, NCP, Trinamool, JD(U), CPI(M), etc, are inclined to support the Bill along with many independents.

For the Bill to sail through the RS, two-thirds of its members (among not less than 50% present) should vote in its favour. Since the Upper House would be passing the Bill with amendments, the Lok Sabha will have to ratify it again. The majority of state assemblies need to vet the constitutional Bill, which proposes to give the states the power to tax services and the Centre transactions beyond the factory-gate, subsequently.

As reported by FE earlier, on the issues of the GST turnover threshold (the Centre has mooted Rs 10 lakh for all states expect the northeastern ones where the threshold will be R5 lakh) and dual control, the Centre and states are close to an agreement. While the states want the exclusive right to tax transactions of the businesses up to a turnover of Rs 1.5 crore and dual (Centre-state) control beyond that, the exclusive control for states may be allowed only in case of firms with a lower turnover level. The Centre reckons that dual control is administratively cumbersome and could confuse taxpayers.

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