The rollout of the Goods and Services Tax (GST) from April 1 seems highly unlikely after negotiations of the GST Council came virtually to a standstill on Wednesday with the Centre and the States refusing to budge from their stance on issues relating to dual control as well as cross-empowerment and taxing sea trade.
“There are difficulties. We are moving against time. That’s why we are meeting again on January 16,” said Finance Minister Arun Jaitley, who chairs the Council, while declining to comment on whether the targeted deadline would be shifted.
After the eighth round of discussions concluded, Kerala Finance Minister Thomas Isaac said, “Working overtime, it should be possible to meet the deadline of September. I am not very optimistic about rolling out GST from June or July because it would require a lot of preparation.”
While the States raised concerns over the impact of demonetisation on revenue collections, Jaitley was confident that the Centre would exceed the Budget estimates for direct and indirect tax collection this fiscal. The Centre has pegged its net tax collections at ₹10.54 lakh crore in 2016-17. By November 30, it had collected ₹6.21 lakh crore.
Higher compensation The States also sought higher compensation for revenue loss post-demonetisation. Jaitley said the Finance Ministry has asked them to give their revenue collection estimates for December as well as comparable data for the past two to three years. “Revenues for most States have risen after demonetisation,” he said.
Jaitley said that 10 of the 11 chapters of the draft Integrated GST law had been approved.
“The definition of the word ‘territory’ and the issue of dual control and cross-empowerment still need to be resolved,” he said, adding that he would prefer a consensus through discussion. Isaac said the other issues remaining before the GST Council included ways to fund the compensation to the States and the participation of the States in the Integrated GST (IGST).
The States are understood to have said that the IGST cannot be levied without their cooperation, although the Constitution Amendment Bill for GST can be interpreted to mean that it will be levied and collected by the Centre.
“Most taxpayers undertake intra-State and inter-State supplies, and the States have to be administratively empowered to assess and collect taxes not only under Centre and State GST but also under IGST,” said Andhra Pradesh Finance Minister Yanamala Ramkrishnudu.
Some States have sought a rework of the revenue from the highest tax bracket. States have also indicted they will not yield ground on exclusive control of businesses with an annual turnover of ₹1.5 crore.