FM points to 16 Sept deadline as consensus evades GST council meet
03 December 2016
A meeting of the GST Council, the highest decision making body for heralding the new indirect tax regime, on Friday failed to arrive at a consensus on the tax rate or the division of taxes between states and the centre. But, finance minister Arun Jaitley said rolling out of GST before 16 September is now a constitutional necessity as states will not be able to collect their share of taxes thereafter and that there was no scope for a further delay on the decision.
''The Constitution does not permit delay in GST implementation. The government notified GST on September 16 and the constitutional amendment itself says the current indirect tax system can continue for one year, after which the GST has to come,'' Jaitley said.
"So, if as on September 16, 2017, there is no GST, then there is no taxation in the country,'' Jaitley commented amidst moves by some states and union territories to hold the country's most ambitious tax reform - the Goods and Services Tax - hostage over the centre's most ambitious demonetisation drive aimed to fight the menace of black money.
The finance minister, however, said that efforts will be made to have a wide tax base and simple and reasonable tax rate, even as the first day of the fifth meeting of the GST Council on Friday failed to break fresh ground.
''Today, each person gets assessed thrice, in each of the three taxations (including VAT and central excise). Now, you will only be assessed once and what one authority assesses, others will have to accept that assessment,'' he said.
Jaitley reiterated that states should shed the idea of opposing every reform as that makes investors wary.
Jaitley's remarks follow high drama by representatives of some state governments and union territories over the effects of demonetisation on tax collection by state governments.
''I hope there will be discussions on demonetisation tomorrow because some of the state ministers said it is affecting the tax collections and will have an impact on GST rollout,'' said Manish Sisodia, deputy chief minister of Delhi, who also holds the finance portfolio.
The meeting, which will continue today, is being held amidst concerns expressed by a number of states, including West Bengal, over the impact of the demonetisation on economic growth.
Jaitley, who chairs the Council, is hoping to reach a consensus with states on two issues - approval of the draft model legislation for the centre, the states and the integrated GST and compensation to the states as well as the issue of administrative control over businesses.
Most of the state ministers present wanted the centre to pick up the deliberations from where the Council left off at its earlier meeting. But although a few provisions of the draft GST Bill were discussed, the dual control issue did not come up at all.
Sisodia confirmed that the meeting did not take off from the points discussed the last time.
Kerala finance minister Thomas Isaac was more blunt. He said: ''There was no conensus at the meeting. If the GST Bill faces any opposition in Parliament, the centre will be solely responsible. It has to change its adamant stand over sharing of revenues. Despite our objections, the centre did not take up this issue for discussions, but started a debate on the GST Bill.''
On the GST law, Kerala, Uttar Pradesh, West Bengal and Tamil Nadu have called for a horizontal division of assesses under the GST, which would give them exclusive control over small businesses that have an annual turnover of less than Rs1.5 crore. There would be cross-empowerment of officials of the centre and the states beyond this threshold.
''Many of the states are uncomfortable with central officers' encroaching into the jurisdiction of the states,'' said Sisodia. ''Dual control below Rs1.5 crore is not fair on traders or on the state government.''
However, calling for easier registration and compliance procedures, a number of other states and the union finance ministry have argued for a vertical division of assesses, under which both the centre and state will get a fixed number of assessees.
The delay in securing a consensus is also raising questions about whether the government can meet the April 1, 2017, deadline to roll out the GST regime.
''If the GST is not rolled out from April 1, 2017, it can be introduced from the second quarter of that fiscal year. But the government is stuck, given the constitutional.