"Petroleum products have been kept outside the GST regime in the Bill. The committee favours that the item should be kept within the Bill"

The Empowered Committee of State Finance Ministers, on Tuesday, demanded that the proposed Goods Services Tax (GST) Council should decide on how to levy taxes on petroleum products.

“Under the ‘declared good’ concept, the Union Government can impose taxes on certain products without consulting the States. States have opposed this as they have lost in petroleum products,” said Sushil Kumar Modi, Deputy Chief Minister of Bihar, and Chairman of the Empowered Committee, at a press conference here.

The State finance ministers suggested a number of revisions in the 115th Constitutional Amendment Bill, 2011, which was pending with a Parliamentary Standing Committee.

Mr. Modi said: “Petroleum products have been kept outside the GST regime in the Bill. The committee favours that the item should be kept within the Bill. And the GST Council should decide how to levy taxes on petroleum products.”

States had also bargained hard for their autonomy in the proposed GST regime, Mr. Modi said States were also opposed to dual control provisions. “One agency should deal with the GST instead of two different agencies from the Centre and the States. Small traders suffer under the dual control system.” There were also some disagreements regarding exempted items and the threshold rate.

Three sub-committees have been formed to work out the finer details on issues such as place of supply rules, revenue neutral rates and dual control. These committees have been asked to submit their reports within three months.

The Empowered Committee also opposed formation of the dispute settlement authority. “If any of the GST Council recommendations are disputed by the State government, under the Bill provision, it would have to be referred to the dispute settlement authority. However, States felt that any dispute should be resolved by the Council itself. The Centre has agreed to the proposal,” Mr. Modi said.

He said, “We have asked the Centre to define the word consensus. States should have two-thirds weightage while the Centre should have one-third in the GST Council. The decisions will have to be taken by three-fourths majority.”

“The Centre has also agreed to the proposal that in the event of natural calamity, the respective State government should have the flexibility to levy taxes during that period for raising additional resources,” Mr. Modi said.

The Chairman of Empowered Committee said the Union Finance Ministry would convey the State’s concerns to the Standing Committee.

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