GST Bill: Centre likely to agree on full compensation for five years

Shishir Sinha New Delhi | Updated on January 24, 2018

Rajya Sabha panel to submit report today

The government has indicated that it is willing to accept the Rajya Sabha Select Panel’s recommendation on full compensation to States for five years after implementation of the Goods & Services Tax (GST).

The panel is expected to submit its report on Wednesday.

“We don’t think that loss will continue after two years (from the date of implementation of GST). So, accepting 100 per cent compensation for five years should not create any problem,” a key government official said here on Tuesday.

The Constitution Amendment Bill for the introduction of GST prescribes a five-year compensation formula with 100 per cent for the first three years, 75 per cent for the fourth year and 50 per cent for the fifth. However, States are seeking 100 per cent for five years, which has also been recommended by the Select Panel.

Voting pattern dispute

Though the panel has agreed with the proposed voting pattern of two-third for States and one-third for the Centre in the GST Council, the Congress party wants this changed to three-fourths for the States and one-fourth for the Centre. The official said that such a voting pattern will lead to ceding more fiscal policy power to the States, which is not acceptable.

Another contentious issue is the 1 per cent additional tax proposed in the Bill to benefit manufacturing States. There are concerns that this will have a cascading effect.

Even the Select Panel has expressed concern, but did not recommend modification. The official noted that the provision in the Bill talks about tax up to 1 per cent, so “options are available to mitigate the cascading effect, if any.”

Amidst strong protests from the Opposition, the Bill was referred to the Select Panel of the Rajya Sabha during the Budget session. Now the Committee has adopted its report with a few dissent notes.

The report along with the revised Constitution Amendment Bill was sent to the Vice-Chairman of the Rajya Sabha.

It may be noted that unlike the Standing Committee, any amendment suggested by the Select Panel will not require approval from the Cabinet.

Published on July 21, 2015

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