Centre willing to reconsider sticky issues in GST

The Narendra Modi-government is now willing to negotiate on contentious proposals such as one per cent manufacturing tax and inclusion of petroleum products within the indirect tax regime, as pressure mounts from the domestic and international investor community to roll out the Goods and Services Tax (GST) for ‘Make in India’ to succeed.

The government, in its bid to woo the Congress, is now sending signals of re-considering these issues, sources involved with the developments said. The thinking within the government is that some consensus can be built with the Congress so that the April 1, 2016 deadline for the roll-out of GST can be met, sources said.

Jayant Sinha, Minister of State for Finance, told BusinessLine : “We are in consultations on these issues. We will see what happens.”

Passage of the Constitutional Amendment Bill for GST in this session of Parliament is critical to meet the deadline. However, there is a section which is still cautious about meeting the deadline, as the empowered committee of state Finance Minister’s is without a chairman and rates are yet to be finalised.

“These are reasonably minor issues on which there is scope for discussion. States have already indicated that petroleum and tobacco products should be subsumed within GST at a later date,” said a source close to the development, stressing that the tax also has to be structured in a way that is acceptable to States.

Besides, the plan to review the one per cent additional tax by States on supply of goods will have to be discussed. Many of the manufacturing States such as Maharashtra and Gujarat have raised concerns over revenue loss due to introduction of this indirect tax regime.

“Ultimately after passage of the Constitutional Amendment Bill for GST by Parliament, State Assemblies too will have to ratify it before the tax can be notified,” pointed out the source.

The proposals have been two of the key sticking points for the Congress Party, which has opposed the provision for an additional one per cent levy and has asked for subsuming tobacco and petroleum products within GST at a later date.

“The Congress wants the rate to be capped at 18 per cent but it is the GST Council, which has representation by states and the Centre that can decide on rates. The Bill can in no way incorporate the rates and there is no re-thinking on this issue,” the official said.

Sources said that while other measures for ‘ease of doing business’ have been already initiated including relaxation of foreign direct investments (FDI) norms and rules, the investors want the tax regime to be simplified at the earliest. “Most investors wanted GST,” he added.

Meanwhile, the Finance Ministry is also working on putting in place the administrative systems for GST to ensure that the tax can be rolled out from next fiscal.

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