The central government is open to dropping the 1% origin-based tax on inter-state sale of goods if the industry demands so, and would let the proposed goods and services tax (GST) Council to decide the contours of a tax dispute resolution mechanism in the form of setting up a tribunal or authority, special secretary in the finance ministry Rashmi Verma said in New Delhi. The government’s willingness to drop the 1% tax as recommended by chief economic advisor in the finance ministry Arvind Subramanian in his recent report on GST rate will help the Modi regime to meet one of the key demands made by the opposition Congress party, the support of which is crucial for passing the GST Bill in the Rajya Sabha. The ruling NDA and the Congress party are still not able to arrive at a consensus on passing constitutional amendments for rolling out GST because of a trust deficit on account of various political issues.
“If, after consultation with various industry and political parties, it is felt that we should drop the 1% additional tax, then we are open to it,” Verma said.
“I also agree that with the 1% additional tax going (away), GST structure will improve considerably because even if this levy is allowed for only two years, there will be some amount of cascading effect”, she added.
She said the government has already made changes in GST Bill, which is pending in the Rajya Sabha, to minimise the cascading effects of the 1% additional tax on inter-state movement of goods as recommended by a select panel of the Upper House. It has been modified to apply only on inter-state sales not on inter-state supply of goods, which also includes stock transfers within a group of companies.
Verma said at an event organised by industry body Assocham that the proposed GST Council with Central and state finance ministers as members will recommend the modalities for resolving disputes between between the Centre and states and among states but will not adjudicate on these by itself.