The Empowered Committee on Goods and Services Tax (GST) has reportedly reached a broad consensus on the much-awaited tax reforms at a meeting here on Tuesday.

The committee will meet again in July to discuss the revenue-neutral rate and decide the fine-print of dual-control issues between the Centre and the States. 

According to Finance Minister Arun Jaitley and West Bengal Finance Minister Amit Mitra, who is chairing the committee, only Tamil Nadu raised concerns against the GST rollout plan.

While neither Jaitley nor Mitra clarified the reasons behind the opposition, finance ministers of at least two major industrial States said Tamil Nadu had concerns about revenue loss and wanted a separate dispute-resolution body on GST.

Representing Tamil Nadu, minister KC Veeramani, who was the first to speak at the meeting, also submitted a representation before the committee.

Another finance minister from a major State, however, didn’t find much merit in Tamil Nadu’s objection. “Concerns for revenue loss are not exclusive to Tamil Nadu. Also, the GST council is created for dispute resolution so there is little point in demanding another body,” he said.

Calling the meeting as a “significant move” towards implementation of GST, Jaitley said he was hopeful that the Bill would be passed in the monsoon session. The Bill has already been cleared by the Lok Sabha.

“Virtually every State has supported the GST, except one,” Jaitley told newspersons. According to him, “the Centre will give constitutional guarantee to compensate States for revenue loss, if any, for a five-year period,” up from the initial proposal for a three-year safety blanket. The Mamata Banerjee government in West Bengal was pushing for this. Jaitley also reiterated that the government is flexible on imposition of 1 per cent inter-State levy.

Finance Ministers of producing States such as Haryana, Telangana, Gujarat and Punjab told BusinessLine that concerns over revenue loss notwithstanding they support GST. Punjab estimates the loss at ₹4,000 crore a year against tax on agriculture produce.

Petroleum products, alcohol and tobacco were out of the purview of today’s discussion on GST.

Etela Rajender, Finance Minister of Telangana, said: The Centre should look at compensating States beyond the five-year period (75 per cent of revenue loss for the sixth and seventh years and 50 per cent for later years). Rajender, however, insisted that Telangana will bat for GST.

No rate cap According to Jaitley, there was “complete consensus among States against imposition of a constitutional cap on the rate of GST as contingencies might arrive.” Congress demanded a cap at 18 per cent. Mitra later clarified that the proposals received so far recommend rates ranging from 17 to 26 per cent. “A decision on the final rate is expected in the July meeting of the Empowered Committee,” he said.

Jaitley did not give any deadline for the implementation. However, he is hopeful of rollout in April 2017. After  Rajya Sabha’s clearance to the Bill, State Assemblies have to clear the SGST proposals. The integrated GST (IGST) legislation is also required.

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