GST Council meet put off by a week as consensus eludes

Business Standard By Archis Mohan Indivjal Dhasmana & Aditi Phadnis November 24, 2016. 00:45 IST

Officials trying for consensus with states on tax, compensation law; PM might speak in Rajya Sabha.

The much-awaited Goods and Services Tax (GST) Council meeting, slated for Friday, has been postponed by a week.

Central and state officials are yet to agree on the Bills to effect the proposed system but there is still hope for meeting the April 1, 2017, target to begin the new indirect taxation system. The government says it is confident of being able to introduce the Bills in the ongoing session of Parliament, despite the indefinite adjournments of the latter on the protests over demonetisation.

Also, the government is yet to decide whether to introduce the GST legislations as money Bills (which would mean Rajya Sabha approval is not needed; the governing alliance is in a minority here) or finance Bills.

Prime Minister Narendra Modi might reply to a debate on demonetisation, if it takes place on Thursday, to try and request opposition parties to not stall Parliament proceedings.

The Council, a body comprising the Union finance minister, his minister of state, and state government representatives (mainly their finance ministers), will now meet on December 2 and 3 considering the Bills and compensation legislation, the finance ministry said on Wednesday. Central and state officials will meet on Friday to work out a solution on these.

The officials had met on Monday and Tuesday to discuss the Bills. “The Bills were discussed at length for two days on 21 — 22 November, in the officers’ level meeting of the states and the Centre. Number of issues were resolved during the two day meeting. However, the States desired some more time to internally deliberate on revised draft of the laws within their respective State(s)," a finance ministry statement said.

The states have suggested certain changes relating to returns procedures in the model GST law, a source said, adding they have also asked for changes in wording in the compensation law. "We will finalise the three draft laws at the November 25 meeting," he said.

Beside the compensation Bill, the draft Central GST Bill, the integrated GST Bill and state GST Bill are being deliberated on by the officials. After finalisation of the draft pieces of legislation in the meeting of officers on Friday, these will be placed before the GST Council, the finance ministry tweeted.

The Centre had on November 16 circulated the draft legislation among the states.

Sources said that since the legal changes in the draft laws would take some time, it was decided to postpone the Council meeting.

"Our effort has been to take all decisions by building consensus with the states. In the Council, we have at times discussed one particular issue for as much as eight hours. This spirit of consensus should continue for the future and become a precedent, as differences of opinion on rates and other issues are likely to be a routine affair,\" a source said. The officers committee would not discuss the issue of dividing the administrative control over assessees between central and state officials. This would be decided at the ministerial level. On Sunday, an informal meeting between Finance Minister Arun Jaitley and state representatives could not reach an agreement on this.

According to the proposed rules under the first draft GST Bill, businesses have to file at least three monthly returns and one annual return for each state. Monthly returns are for output supply, input supply and summary accounts, and would cover state GST, integrated GST (IGST) and central GST (CGST).

Currently, businesses have to file value-added tax returns but these are quarterly. Service tax returns must be filed but only twice a year and not state-wise. The GST returns have to contain details of profit according to the profit and loss account, incorporating gross profit, net profit, etc. Also, these have to be audited for those with annual turnover exceeding ~ 1 crore.

At its previous meeting, the Council had agreed on a four-slab structure – 5, 12, 18 and 28 per cent — along with a cess on luxury and 'sin' goods such as tobacco.

Parliament

Separately, Parliament was adjourned on Wednesday after heated exchange between the opposition and the government over demonetisation. The differences also persist over the rule under which a debate should take place. The government wants the debate under Rule 193, which does not entail voting, and the opposition is keen on it under Rule 56, which requires voting. The opposition also wants the PM to make a statement.

The session ends on December 16 and the government is confident of being able to introduce the GST and compensation Bills before it ends. Back-channel efforts were being made from the side of the government to get the two Houses to function. Jaitley, home minister Rajnath Singh and parliamentary affairs minister Ananth Kumar are holding talks with some of the prominent opposition parties.

A government strategist indicated the PM might intervene if the Rajya Sabha were to resume its discussion on demonetisation and its impact. He said the PM would attend Rajya Sabha proceedings on Thursday, which is his day to be present in the House. However, the opposition demand that Modi be present “cannot be a precondition”. The government believes the opposition cannot sustain its protests as the “poor of India” were with the PM on the issue.

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