Finance Minister Arun Jaitley today said virtually all states, barring Tamil Nadu, have come on board on the new legislation and expressed hope to push the long-pending GST bill in the upcoming monsoon session.
After a meeting of Empowered Committee of State Finance Ministers here on the proposed nationwide common indirect tax, Jaitley also said the states' fear of any revenue loss in the first five years has been addressed and the Centre would compensate for these losses.
"Virtually all the states have supported the idea of GST today, barring Tamil Nadu which has expressed some reservations. Tamil Nadu has offered a few suggestions which have been noted by the committee," Jaitley told reporters on the first day of the two-day meet.
At their meeting, the state finance ministers also approved a model GST law, which said that sale of goods and services and all online purchases will attract GST at the first point of transaction and pegged threshold annual turnover for levy of the tax at Rs 10 lakh. The limit will be Rs 5 lakh in North East and Sikkim.
Jaitley said there is "no deadline as such" for the implementation of the Goods and Services Tax which aims to subsume a string of state and central level levies.
The government had earlier targeted to roll out the nationwide single tax regime from April 1, 2016 but the Constitutional Amendment Bill on GST has been stuck in the Rajya Sabha due to opposition by the Congress party.
Jaitley, however, rejected Congress' demand for capping the GST rate, which has been the main issue of contention.
"There is a complete consensus on that, there should not be any such ceiling as exigencies may arise in future. Now it is left to the GST council," he said.
The meeting was attended by Finance Ministers of 22 states, including West Bengal's Amit Mitra as well as Chief Ministers of Arunachal Pradesh and Meghalaya, deputy CM of Delhi and senior officials of seven others.
Later in the day, Tamil Nadu Chief Minister Jayalalithaa met Prime Minister Narendra Modi in the national capital and told him that her state was "concerned about the impact the proposed GST will have on the fiscal autonomy of states and the huge permanent revenue loss it is likely to cause to a manufacturing and net-exporting state like Tamil Nadu".
"The stand of Tamil Nadu government is that before the Constitutional Amendment Bill on GST is taken up, the Government of India should strive for a broad consensus on important issues like compensation period and methodology, revenue neutral rates, floor rates with bands, commodities to be excluded from GST... And clarity on dual administrative control," she said in a memorandum to the Prime Minister.
Stating that this was a record attendance of FMs,
Jaitley said that every state has given detailed views on GST.
Regarding the future roadmap, Jaitley said: "We will try our best to bring the Constitutional amendment in the monsoon session of Parliament. Then the CGST and SGST legislations will be put in place."
On calculation of the revenue neutral rate (RNR), he said the Empowered Committee Chairman and West Bengal Finance Minister Amit Mitra will again convene a meeting of the Committee in July and the Chief Economic Advisor will give a presentation.
About dual control on tax rates by the Centre and states, he said it was again up to the committee to see that it was harmonious and there was no conflict. "It will be again discussed in the next meeting."
On the issue of additional 1 per cent tax as demanded by the producing states, he said the Centre was flexible on the matter. As GST is a consumption-based tax, the producing states had been demanding this extra tax.
Jaitley said the Lok Sabha had approved the GST Bill while it was pending before the Rajya Sabha.
"The first thing which will have to be done is to pass the Constitutional amendment which has to be then ratified by the states. Then Parliament will have to pass the CGST Bill and states the SGST Bills" he said.
Jaitley said the states' fear of loss of revenue for the first five years had also been addressed.
"The Centre will compensate the loss and there should not be any cause for worry," he said.
Mitra said there was "general consensus" on the issue of dual control over taxation structure between the Centre and states.
"The issue of dual control has been discussed and all the participants have spoken about it. The general consensus was that turnover below Rs 1.5 crore will be taxed by the states and beyond that by the Centre," he said after the meeting.
However, the matter would again be discussed at the next meeting in July, he said.
The other major issue discussed at the meeting was the revenue neutral rate (RNR), which Mitra said would come up for discussion again in the next meeting to find out what is the optimal rate.
While the panel of Chief Economic Advisor had suggested RNR of 17 per cent, National Institute of Public Finance and Policy put it at 26 per cent.
Delhi deputy chief minister Manish Sisodia said the discussion on the GST Council as held today would make it more powerful than the state assemblies which some FMs opposed.
