The Centre and States will meet tomorrow to bring about consensus on the Constitutional Amendment Bill for introduction of Goods & Services Tax (GST). The Government aims to bring in new indirect tax reforms from April 1, 2016.

 

“We are working on a variety of discussions with the States. There is a meeting of State Finance Ministers with the Union Finance Minister tomorrow to discuss some of the challenges that they see at this point of time. Once that is resolved we can come up with that legislative calendar,” Jayant Sinha, Minister of State in the Finance Ministry told reporters here on the sidelines of the Delhi Economic Conclave.

 

Sinha said the legislative aspects of the GST are complicated. They have to be approved by the States. CST compensation is one of the items under discussion. It may be noted that the Constitution Amendment Bill introduced by the previous Government lapsed as the 15th Lok Sabha was dissolved. GST aims to subsume central indirect taxes such as Central Excise Duty and Service into Central GST (CGST) and various States levies such as VAT and Central Sales tax into States GST (SGST).

 

There are three key issues of the draft Constitutional Amendment Bill on which States are yet to agree. The first one is threshold limit. Threshold limit means when a business unit exceeds certain annual turnover it will be subjected to GST. The Empowered Committee of State Finance Ministers, in its meeting on August 20, agreed on a threshold limit of Rs 10 lakh for general category States and Rs 5 lakh for special category and North-Eastern States.

 

However, the Centre said this limit is too low and should be raised to 25 lakhs. In fact, the Finance Ministry wrote to the Election Commission to reconsider its decision, but was turned down. Now, the Ministry is hopeful of reaching a solution and said many States are in favour of a higher limit.

 

The second issue is about provision of compensation in lieu of phasing out Central Sales Tax (CST) and the total dues amounted to Rs 33,000 crore. States want to bring compensation in the Constitutional Amendment Bill. But the Centre was set against this demand, though it plans to provide Rs 12,000 crore as the first instalment of dues in the supplementary demands for grants during the ongoing session. It is also considering providing a separate legal mechanism for compensation.

 

The third issue is about petroleum products. States want to keep petroleum out of the GST net. But the Centre plans to keep this within GST with ‘nil’ rate with flexibility for both Centre and States to impose duties over and above GST. Currently, Centre levies customs and excise duties on petroleum products, while States impose sales tax on these products. Meanwhile, both the Centre and States seem to be agreed on keeping alcohol outside GST. Tobacco is also likely to be kept out of the purview of GST.

 

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