Stalemate between the Centre and states over administrative control under the proposed goods and services tax (GST) regime continued today with an informal meet called by Finance Minister Arun Jaitley failing to break the deadlock.
Jaitley's informal meeting with state finance ministers failed to arrive at a common ground on how Centre and states will control assessees under the new regime that will subsume an array of taxes like excise duty and service tax as well as VAT, multiple ministers participating in the meeting said.
With states unrelenting on their position of being given right to control all assessees with up to Rs 1.5 crore annual turnover, it was decided that officials will meet again tomorrow before the meeting of the all powerful GST Council on November 25.
"The meeting has remained incomplete. Discussions will continue on November 25," Finance Minister Arun Jaitley told reporters after the over three hour long meeting.
The issue has remained a contentious one during the previous two GST Council meetings and any disagreement at the next meet holds potential of derailing rollout of the GST from the targeted April 1, 2017.
Jaitley had earlier this month stated that the proposed GST needs to be rolled out by September 16, 2017 before the validity of the Constitutional Amendment brought in by Centre and ratified by states expires.
States like West Bengal, Kerala, Uttarakhand, Uttar Pradesh and Tamil Nadu have insisted on exclusive control over small taxpayers, who earn less than Rs 1.5 crore in annual revenue, for both goods and services.
Uttarakhand Finance Minister Indira Hridayesh said states demanded exclusive control for both goods and service tax assessees of Rs 1.5 crore and below.
"Centre is agreeable on goods, but is not yielding on services. States are looking at their interest to safeguard their revenue. Centre will have to yield to states to get the CGST and IGST bills passed. A middle ground on the issue has to be worked out politically," she said.
Kerala Finance Minister Thomas Issac said it is a stalemate and his state is unwilling to compromise as it has virtually given up its taxation rights.
"The CGST Bill makes provisions for levy and collection
of tax on intra-state supply of goods or services or both by the central government. On the other hand, IGST Bill makes provisions for levy and collection of tax on inter-state supply of goods or services or both by the central government," the statement said.
The UTGST Bill makes provisions for levy on collection of tax on intra-UT supply of goods and services in the Union Territories without legislature.
Union Territory GST is akin to States Goods and Services Tax (SGST) which shall be levied and collected by the States/Union Territories on intra-state supply of goods or services or both.
The Compensation Bill provides for compensation to the states for loss of revenue arising on account of implementation of the GST for a period of five years.
While the four bills approved by the Cabinet today have to be passed by Parliament, the SGST law has to be approved by each of the state assemblies.
Finance Minister Arun Jaitley in his Budget for 2017-18 mentioned that country-wide outreach efforts will be made to explain the provisions of GST to trade and industry.
The biggest tax reform since independence is expected to boost the rate of economic growth by at least 0.5 percentage points, broaden the revenue base and cut compliance cost for firms.
Commenting on the development, Abhishek Rastogi, Partner, Khaitan & Co, said: "The GST plan is well on time and July 1 looks realistic!"
"The timely approval of the Bills by the Cabinet ensures that the industry would have reasonable time to peruse the details of the law impacting them. As a corollary, the assesses will be better prepared for implementation. It is hoped that all the State Assemblies clear SGST on time as well," he added.
