Sense of urgency to build consensus on GST norms
Centre is hard-pressed to meet its intended deadline for the new indirect tax regime, April 1, 2017.
Finance Minister Arun Jaitley had set a November 22 target to resolve all operational issues with State representatives in the Council so that the rates and implementation modalities could be codified into law and passed by Parliament in the winter session.
Council proceedings witnessed smooth functioning in the beginning
When it met for the first time in late September, things appeared to be on track, with the Council agreeing almost unanimously on technicalities such as the turnover thresholds for firms to be covered under the GST and the division of administrative control over tax assesses between the Centre and the States.
A time-bound road map to finalise remaining details, such as the tax rates, compensation for States in case of revenue loss under the new system, as well as the legislative actions required in Parliament and the State Assemblies, was also agreed upon.
Disagreements popping up on following issues
1. The pact reached earlier on administrative control of manufacturing sector assesses has unravelled with States raising fresh concerns. Earlier it was agreed that assesses upto 1.5 cr turnover will be under administrative control of states.
2. The proposal to subsume in the GST all cess levies, several of them introduced by the present NDA government, has been discarded. This was a critical part of the official GST pitch and was backed by the Council in September.
But now the Finance Ministry is keen on an additional cess on ultra-luxury and ‘sin’ goods to fund compensation for States losing revenue.
It has suggested a cess may be better than the 40 per cent slab for demerit goods, mooted by a committee led by Chief Economic Advisor Arvind Subramanian along with two other slabs of 12 per cent and 17-18 per cent.