GST Council fails to decide on dual control, to meet on 3-4 January

24 Dec 2016


The GST Council meeting held on Friday agreed on provision of draft law to provide 100 per cent compensation to states of the loss which is directly attributable to GST implementation for a period of 5 years, although there was no agreement on the issue of dual control of the GST regime.

Finance minister Arun Jaitley will hold budget consultations with state finance ministers in second half of GST Council meeting on 3-4 January next year.

The dual control is part of the Integrated-GST legislation that Parliament needs to pass before the new regime is rolled out.

But for this stumbling block, mirror legislations of Central-GST and State-GST, that have to be approved by Parliament and state assemblies respectively, have been nearly finalized, with most clauses agreed upon.

"The primary draft of CGST and SGST law has been approved by the Council today," Jaitley said at the end of the two-day meeting of the GST Council.

The legally vetted draft of the law for compensation to states will be placed before GST Council at the next meeting, he added.

On the issue of compensation to states for loss of revenue from rollout of GST, Jaitley said it will be paid every two months.

States will be compensated 100 per cent of the loss which is directly attributable to GST implementation for a period of 5 years, he said.

The issue of dual control has been stuck at consecutive meetings of the GST Council because some states like West Bengal and Kerala wanted a minimum turnover criteria be fixed to decide who will control which assessee, a proposal the centre is not agreeable to because states lack expertise on levies like service tax.

Meanwhile, some state finance ministers were of the opinion that compensation formula would now have to be reworked as the Rs55,000 crore decided before demonetisation may not be enough as states revenues may take a hit.

West Bengal finance minister Amit Mitra said states may suffer revenue loss of anywhere between 20 and 30 per cent in Q3.

He said the number of states, which had to be compensated for loss of revenue may go up due to impact of demonetisation on tax collection.

J&K finance minister Haseeb Drabu said the council can look into various options, including increasing number of years for compensation from five to six or set up a revolving fund in case amount shoots above Rs55,000 crore.

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