Members of GST Council met for the eighth time with Arun Jaitley to discuss the tax implementation.
Highlights
- GST, key reform, creates one national Goods and Services Tax
- Centre intent on April 1 deadline but major issues unresolved
- States vs centre over taxation powers and compensation
A bold reform seen as crucial for economic growth, the national Goods and Services Tax or GST, cannot be rolled out to meet the government's April 1 deadline, say finance ministers from different states. As members of the decision-making GST Council, they met for the eighth time with Union Finance Minister Arun Jaitley, but were unable to close various contentious issues.
"An April 1 deadline is out of the picture. Even July 1 is unlikely. September 1 is more likely," said Kerala Finance Minister Dr Thomas Issac to NDTV. Yesterday, Delhi Finance Minister Manish Sisodia had also projected a September launch for the reform.
However, Finance Minister Jaitley said he expects viable solutions to current points of contention which he listed as "Definition of territory, cross empowerment and dual control".
Tax rates under the GST have been set in four different slabs. The Council has struggled with deciding the rate of tax to offset possible revenue losses. Another major dispute is how to divide the powers to assess or apply tax between the centre and states. Businesses with an annual turnover of up to 1.5 crores should be taxed by states, according to West Bengal Finance Minister Amit Mitra and others. The centre, however, disagrees because it would be bereft of a sizeable group of tax payers.
The centre had agreed earlier to compensate states over the next five years for the estimated losses they will incur by replacing a mesh of taxes with the GST, which unifies India into a single market. But now, states say they must get more money than was previously agreed upon because the demonetisation drive, brought in abruptly by Prime Minister Narendra Modi in November, has hurt states economically, slowing down consumer spending, manufacturing and trade amid a mega cash crunch.
That was a point stressed by the Bengal Finance Minister today, but Mr Jaitley countered, "States which have governed well have earned well. Punjab, Haryana, Assam revenues have increased as they have mentioned" he said citing states that are governed by the BJP. The council will meet again on the 16th.
The GST is a signature reform of PM Modi and, according to his government, could boost economic growth by up to two percentage points.
The tax rates will range from 5 to 28 percent, with 12 percent and 18 percent as standard rates, with a separate central "cess" that will be levied on tobacco products, luxury cars and aerated drinks, charged on top of the 28 percent tax bracket. The "cess" will remain in place initially for five years and its proceeds would be used to compensate states for revenue losses following the GST's implementation.