Centre-states differences persist over key aspects of GST

Differences between Centre and states over some key provisions of the Goods and Services Tax remain, with the Empowered Committee insisting that threshold turnover for levying GST be retained at Rs 10 lakh and petroleum be kept out of the purview of the new tax regime.

The Empowered Committee of state FMs, which met here on Tuesday, however expressed hope that the GST could be rolled out by April 1, 2016, notwithstanding the hitches.

Talking to reporters, GST Empowered Committee Chairman Abdul Rahim Rather said that the Centre had written to him suggesting that the threshold annual turnover for levying GST should be increased to Rs 25 lakh from Rs 10 lakh.

The states had in August decided that the threshold be fixed at Rs 10 lakh and had informed that to the Centre.

"In September, the Centre wrote to us suggesting that this decision of the Empowered Committee should be reviewed.

The Centre suggested that the limit should be Rs 25 lakh. Even if it is not Rs 25 lakh, Rs 10 lakh limit should be increased.

"But finally the Committee took a decision that they will go by the decision that is already taken that is Rs 10 lakh," Rather said, adding that the final call on threshold will be decided by the GST Council.

The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.

The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011, had lapsed and the NDA government will be required to come up with a fresh bill.

The Finance Ministry is in the process of preparing a Cabinet note on the GST Bill.

States want that petroleum, alcohol and tobacco should be kept out of the purview of GST. The states are yet to receive the draft constitutional amendment bill from the Centre.

"States have already said that petroleum, alcohol, tobacco should be excluded from GST. We are waiting for response from Centre. We have not received the revised draft Bill. We will discuss and offer our comments (after we receive it)," Rather said.

The Empowered Committee also reviewed the revenue neutral rate for the GST, comprising C-GST and S-GST, as suggested by a GST sub-committee.

The sub-committee had suggested S-GST rate at 13.91 per cent and C-GST rate at 12.77 per cent.

As regards the items exempted from the purview of GST, the Empowered Committee suggested that they should be mentioned in the Constitutional Amendment Bill.

Rather said the states have made it clear to the Centre that while preparing the draft GST Bill the views of the states should be respected.

"I have made it abundantly clear to the Government of India because that will be in the true spirit of cooperative federalism. States should be carried along. If all goes well, the Constitutional Amendment Bill is carried in Parliament by both the Houses, I think the 2016 target roll out date is achievable," he said.

The Centre is planning to provide Rs 13,000 crore on account of CST compensation to states for dues till March 2010 and is likely to seek Parliament approval for the same in the ensuing Winter session beginning November 24.

"States have said that compensation should be constitutionally provided," Rather said.

CST, a tax imposed on the inter-state movement of goods, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT). The centre had then promised the states that it would bear losses due to reduction of CST.

As per the compensation mechanism, the Centre would bear 100 per cent of the loss accrued to states in 2010-11 fiscal on account of lowering of CST. However, for 2011-12 and 2012-13 fiscal, the Centre would give 75 per cent and 50 per cent of the losses to the states.

The GST rollout has missed several deadlines because of lack of consensus among states over certain crucial issues on the new tax regime.

Hinting that GST Constitutional Amendment Bill may be introduced in the ensuing Winter session of Parliament, Finance Minister Arun Jaitley had said the government was in the final stages of talks with states on the issue.

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