The Centre’s efforts to finalise the rates for the Goods and Services Tax have been pushed back to November as the States opposed the Finance Ministry’s proposal to levy a cess for compensation, an issue which had been resolved on Tuesday.
The States also called for a fresh discussion on control of assessees.
“The discussion on these two items is continuing. We have converged towards a consensus, an announcement will be made after the next GST Council meeting,” Finance Minister Arun Jaitley said on Wednesday after the conclusion of the third round of meetings.
The GST Council will now meet on November 3 and 4 to finalise the rate structure and once again on November 9 and 10 to discuss the draft legislation. Despite the delay, the Centre and the States are still hopeful of meeting the rollout date of April 1, 2017.
Some States have opposed the Centre’s proposal to levy a cess on ultra-luxury goods, tobacco and pan masala and for clean energy; instead, they favoured a higher tax rate on consumer durables. The Centre requires ₹50,000 crore to compensate the States for any revenue loss under GST for the next five years and had proposed to fund it through the cess.
“A cess can be levied for clean energy and on sin goods such as tobacco, which will together yield ₹44,000 crore. The remaining ₹7,000 crore can be financed through various ways such as a higher tax than the proposed rate on consumer durables,” said Kerala Finance Minister Thomas Isaac.
He also called for a review of the proposal to have a lower tax slab of 6 per cent under GST as against the current 5 per cent and said this would impact the common man.
The Finance Ministry had on Tuesday proposed that GST should have a four-rate structure with two standard rates of 12 per cent and 18 per cent. Food items and other necessities would be taxed at 6 per cent while white goods and luxury products would be taxed at 26 per cent.
Similarly, noting that the power to levy the cess would vest only with the Centre, Tamil Nadu cautioned against a clean energy cess on coal and lignite as it would have an adverse impact on the cost of energy.
Meanwhile, the States have also called for a re-opening of the issue of administrative control over small businesses.
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