New Delhi, December 23
The GST Council is yet to evolve a consensus on the prickly issue of administrative turf over assessees, which could make or break implementation of the new indirect taxation system from April 1, 2017. The Council did not take up the issue at its two-day meeting on Thursday and Friday even as it cleared all other provisions of draft model GST Bill and whole of compensation Bill.
The next meeting of the GST Council, slated to take place on January 3 and 4, will try to resolve the issue of dividing the administrative powers between the Centre and states, but the signals given by the state governments on Friday suggest that it would be a difficult task to resolve it. The meeting will also take up integrated GST (IGST) Bill.
“That leaves us with a very important work of IGST law and the cross empowerment,” finance minister Arun Jaitley told reporters after the meeting
A state finance minister said states are clear that there should be no dual control over assessees with Rs 1.5 crore of annual turnover. This means that states want sole control till this limit, and share of powers with the Centre over this threshold.
On the other hand, the Centre is pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assessees between itself and the states, using a computer programme, states want sole control over assessees up to Rs 1.5 crore of annual turnover.
The division of administrative turf involves another issue — whether states can have control over assesses having inter-state businesses. This comes under the
IGST Bill and the Centre is empowered to collect IGST and distribute to states.
The issue of IGST also involves territorial limits of states. This could also turn out to be a vexed issue, if not resolved quickly.
“Definition of territory of state itself is a matter of constitutional interpretation. We will have to discuss it and reach a decision,” Jaitley said.
The Centre wants to take 12 nautical miles into sea as union territory and tax any item sold there, while coastal states are averse to it.
If these issues are resolved even in the next meeting, the Bills could come up in the Budget session of Parliament.
When asked whether the GST could be rolled out from April one, 2017, Jaitley said, ” Well, I am trying my best to do that. I don’t want to hasten the process of discussion, I don’t want to delay the process of implementation. Left to myself I would like to (implement it from April one, 2017),” he said.
However, the finance minister indicated that there would not be voting to resolve the contentious issues and these would be settled through consensus.
“It would be resolved through a deliberative way. My experience with seven meetings is GST Council meets for a full day. There is discussion for hours on a single subject. There is high standard of debate. We get alternative suggestions. We accept the best solution after listening to all proposals. We have not decided any issue through a vote or by a give and take policy,” Jaitley said.
To a query that industry wants more time to prepare for GST, Jaitley said,”That we will decide once we cross all bridges. I am not going to bind myself with anything. Our effort is to do it as quickly as possible. And i think we are making a reasonable headway.”
The council approved the draft model GST Bill, except for provisions relating to administrative turf, and now these will be drafted in legally vetted language.
The Council also decided to provide full compensation to states every two months for first five years of the GST roll out. There are expectations that the total compensation would amount to Rs 50,000 crore a year, but Jaitley said there is no cap on the compensation amount.
On whether compensation would be higher due to demonetisation, the finance minister made it clear that it is linked to GST and not with any other issue.
“If there are high deposits in banks and we got higher tax receipts after demonetisation, will it be linked to GST?” Jaitley wondered.
The next meeting would also discuss the states proposals for the union Budget of 2017-18.
As the ruling party and the opposition had bitter exchanges over demonetisation, a question was asked whether there would be political hurdles in the way of GST. The finance minister said: “We are living in the real world and politics is a part of the real world. At the end of the day, one has to assume that elected representatives of the Centre and states have a sense of responsibilities. So far, despite initial divergence of views, it all ends with convergence.”