Stalemate over GST continues with states hardening positions on issues of territorial jurisdiction

Stalemate over GST continued with states hardening their positions on issues like territorial jurisdiction over high sea sales and control over tax assessees, even as Finance Minister Arun Jaitley hoped these matters would be resolved at the next GST Council meet.

While April 1 rollout schedule has long been ruled out, non-BJP ruled states put the new implementation schedule not before September. Jaitley was non-committal on the roll-out dates saying “we know the difficulty, we are moving against time”.

The next meeting of the GST Council on January 16 would discuss the issue of jurisdiction over assessees as well as try to reach a finality on taxation of territorial waters.

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“The IGST law, having 11 chapters, was discussed today.  The initial 10 chapters have been approved and some issues remain open because they are in the process of being discussed. We will be meeting again, because the nature of discussion was inconclusive, on January 16 and have a seating to conclude the discussion on those specific points,” he told reporters here.

Stating that the issue of territory is a complex issue, Jaitley said the area within 12 nautical miles into the sea is an Indian territory and a question is whose territory is it.

“Conventionally service tax and customs are charged by Government of India in those areas. Some states had, as far as fishing business is concerned the Constitution provides for fishing rights to states in that area. Some states have been levying taxes in the nature of sales tax/VAT,” he said

Jaitley said since states have been levying these taxes, they want to continue to levy them, but the contra argument is that high sea area strictly doesn’t fall within the definition of state and as per Constitution is an Union Territory. This issue is currently before the Supreme Court.

“The case of states is we should be allowed to raise taxes. It is an issue on which Constitutional solution has to be followed and the solution has to be legally tenable... The issue is very close to resolution but we need a legal response to it, it has to be adequately tested,” Jaitley said.

Kerala Finance Minister Thomas Isaac said the other remaining issues before the GST Council include ways to fund the compensation to states for GST rollout and states participation in Integrated GST (IGST).

“Working overtime, it should be possible to meet the deadline of September. I am not very optimistic about rolling GST out in June/July. Because it is a new tax and lot of complexity involved, it would be better to move in after full preparation. So GST, to my understanding, will be implemented from September,” he said.