Select panel may discuss dispute resolution mechanism in GST Bill

The Centre has agreed to fully compensate states for any revenue loss due to GST in the first three years, 75% of any revenue loss in the fourth year and 50% in the fifth year

A select committee of the Rajya Sabha might take up the issue of dispute resolution mechanism in the constitution amendment Bill on the goods and services tax (GST).

The Bill seeks to entrust the power of dispute resolution to the GST Council, comprising the Centre and states, instead of an independent body, as sought by an earlier draft.

K N Balagopal, a Rajya Sabha member of the CPI(M), told Business Standard, "A dispute redressal mechanism is needed as issues are bound to come up between states, or the Centre and states, or even with local bodies. We will raise this issue when we discuss the Bill in detail."

The Centre has agreed to fully compensate states for any revenue loss due to GST in the first three years, 75 per cent of any revenue loss in the fourth year and 50 per cent in the fifth year. The Centre and states could, for instance, differ over loss estimates, an issue that had earlier created distrust over phasing out the central sales tax.

The Bill presented by the United Progressive Alliance (UPA) government in Parliament had provided for setting up of a Goods and Services Tax Dispute Settlement Authority. However, a standing parliamentary committee had observed the authority would have overriding powers over Parliament and state legislatures, and must be omitted.

Accepting the recommendation, the National Democratic Alliance's (NDA's) Bill states, "The Goods and Services Tax Council may decide the modalities to resolve disputes arising out of its recommendation."

During the debate on the Bill in the Lok Sabha, however, Congress MP Veerappa Moily had said, "As regards resolution of disputes arising out of its recommendations, which council will annul its own decisions?"

Sumit Dutt Majumder, former chairman of the Central Board of Excise and Customs who had played a crucial role in drafting the UPA Bill, said he favoured resolution by an independent body rather than the GST Council.

The GST Council will give the Centre one-third voting power and the states two-thirds. Any decision will need three-fourth of the votes, thus neither the states together or the Centre alone can change the GST. However, the dispute resolution body cannot work on this principle.

Rohit Jain, partner at Economic Laws Practice, said any dispute resolution mechanism would need a judicial member. The authority was supposed to have a former Supreme Court judge or chief justice of a high court as its chairman. The two other members were to be experts in law, economics or public affairs.

Jain said such an authority could be created later, say, at the time of the GST Bills that are to be drafted by the Centre and states.