Negotiations over GST remain stuck on issue of control of tax payers in the new regime

Negotiations over GST remain stuck on the issue of control of tax payers in the new regime even as the GST Council on Friday made headway in approving most of the clauses of supporting legislations.

While the April 1 rollout target looks virtually impossible, GST Council tweaked the compensation mechanism to allow bi-monthly payment to states instead of previously decided quarterly payout.

The issue of dual control and the all important IGST legislation, which has been hanging fire for past three meetings, will be taken up at the next meeting on January 3-4.

Briefing reporters after the 7^th GST Council meeting in New Delhi, Finance Minister Arun Jaitley said draft CGST and SGST, which are mirror images of each other, were cleared along with compensation law.

“If you ask me what are the principle residuary items left, the main item of course is the IGST and dual empowerment issue. The second is the legally vetted language which will be placed in the next meeting on January 3-4,” Jaitley said, adding that the Council will take up items in each tax bracket after that.

While the compensation was earlier proposed to flow from the cess to be levied on luxury cars and sin goods like tobacco, demonetisation has led states to believe that more number of them would need support to make up for the revenue loss arising from GST roll out.

It was previously thought that 4-5 states will need compensation for revenue loss, the economic activity being impacted by demonetisation of 500 and 1000 rupee notes would necessitate support to even more states because of loss in tax revenues.

According to sources, the ‘source of compensation fund’ part of the law is being redrafted to state that compensation amount would be raised from cess and “any other taxes as the GST Council decides’.

The Finance Minister said all decisions have been take through consensus so far and no decision has been taken through “vote or give and take. At the end of all the decisions, it is rationale that prevailed.”

Asked about industry needing three months’ time after legislation is passed, he said, “That we will decide once we cross all bridges. I am not going to bind myself...our effort is to clear it as quickly as possible. I think we are making a reasonable headway.”

When asked if April 1 deadline still stands, he said, “I am trying my best to do that...left to myself I would like to do that.”

On the issue of dual control, he said there is only one law and two bureaucracies so the question is how the jurisdiction will be divided for audit management.

“It will be resolved through deliberative mechanism,” he added.