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Tenth GST council meet: Bill for compensating states gets nod; CGST, IGST hang in balance

Clashes between Centre and states over minutes of previous meet

Written by Aanchal Magazine , Liz Mathew | Udaipur/new Delhi |
February 19, 2017 1:26:33 am
Arun Jaitley, GST, GST compensation law, GST draft, GST news, Arun jaitley GST, GST council meet, Goods and services tax Finance Minister Arun Jaitley with other dignitaries during the 10th GST Council meet in Udaipur on Saturday. PTI

With the clock ticking on the transition to the proposed Goods and Services Tax (GST) regime, the tenth meeting of the GST Council here managed to approve only one draft law pertaining to compensation to states, even as three crucial draft laws — Central GST (CGST), Integrated GST (IGST) and State GST (SGST) — got caught in a tussle between the states and the Centre. Finance department officials of three states, who did not wish to be identified, said that there were clashes between the Centre and the states over the drafting of minutes of the previous GST Council meeting, which held up the deliberations at Saturday’s meeting. The dispute over the minutes related to the wordings over the division of new registrants, permission to states to tweak division of taxpayers after consultation with the Centre and referral of disputes relating to imports and exports to the Centre.

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The Centre proposes to get all the three draft bills passed in the second half of the budget session of the Parliament and, therefore, it will be crucial for the Council to approve it in its next meeting on March 4-5.

“It’s the first time that we had to ask for deletion of certain items from the minutes of meeting held last month. The minutes said that new registrations would be divided 50:50 between the Centre and the states. It wasn’t discussed in the last meeting. Also, the minutes recorded said that states can later decide to change the 90:10 formula below Rs 1.5 crore turnover threshold in consultation with the Centre. Tomorrow, a state minister can say why should he leave 90 per cent and take 80 per cent. 90:10 has been decided, 50:50 has been decided but after that any state can sit with the Centre and decide to rework it on their own. It was not discussed in the last meeting,” a state finance minister, who did not wish to be quoted, said.

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Another state’s finance minister, who also did not wish to be named, said that there was an argument over the division of new registrants under the proposed indirect tax regime. State government officials said they have asked for an equal division of new registrations between the Centre and the states. But after a certain period, the division of administrative control should be in the agreed upon formula of 90:10 below Rs 1.5 crore annual turnover threshold and 50:50 above the threshold. A central government official, however, said the ratio of division would be decided only after achievement of a certain threshold by the new registrants after a certain period of time.

The minutes of the ninth meeting of the GST Council, held on January 16, had recorded that the states have been given the concession to change the formula over and above the agreed upon 90:10 division of tax assessees below the annual turnover threshold of Rs 1.5 crore between states and Centre, respectively, and an equal division of assessees for a turnover of above Rs 1.5 crore, after consultation with the Centre. Also, it had said that the Council had approved equal division of new registrants.

After the Saturday’s meeting, finance minister Arun Jaitley said that the legal vetting of the CGST and SGST Bills had thrown up the need for clarifications on some of the provisions from the Council relating to issues on constitution of the appeals tribunal under GST, the definition of agriculture, the exemptions that have to be given during the transition phase, delegation of powers under GST and the composition scheme. During the discussion, it was also decided that a separate draft GST Bill needs to be floated for Union territories, mirroring the draft model GST law.

“…during the legal drafting of the CGST, SGST and IGST laws, certain contentious issues came to the fore and it was necessary to place all the issues before the Council again to take specific directions,” Jaitley said.

Jaitley said that the legal committee took clarifications from the Council and these will be incorporated in the draft laws, which will come up for approval in the next meeting on March 4-5. After the GST Council discusses legally vetted Bills, another meeting is likely to be held in March-end in Srinagar to finalise the rules for the indirect tax regime.

He said that once the Bills are cleared by the Council, the next stage will be to fit the items into the various tax slabs.

The finance minister added that the Council had decided against giving additional powers to the Comptroller and Auditor General of India (CAG) under the indirect tax act. He said that CAG already has powers to scrutinise the finances.

“CAG is already empowered under the CAG Act to call for any information from the government in relation to public finances. Under the taxation law, it need not be separately given. The income tax act has not given any separate powers to CAG. Why should there be any separate powers under the indirect tax act?” Jaitley said.

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