States have rejected the Centre’s draft Bill for the Goods and Services Tax (GST), dealing a major blow to the Modi Government’s resolve to roll out the reform at the earliest.
The Centre-States stalemate has put a question mark over whether the Modi Government will be able to introduce the GST Constitution Amendment Bill during the ongoing Winter Session of Parliament. Union Finance Minister Arun Jaitley had said in Lok Sabha last month that he would introduce this Bill during the current session. The GST roll-out has missed several deadlines in absence of Centre-States consensus.
At a meeting of the Empowered Committee of State Finance Ministers on Thursday, States opposed the Centre’s draft Bill and its proposal to extend the GST to petroleum goods and entry tax.
“Consensus eludes Centre and States on the three main issues of compensation, petrol tax and entry tax,” Empowered Committee Chairman Abdul Rahim Rather told reporters. He also said the Empowered Committee would not support the Centre’s Bill unless it conceded to the States’ three demands.
The GST will subsume all excise and service taxes. States want compensation from the Centre for the revenues they will lose over five years from the shift to the GST regime. States also want a clause on the compensation to be inserted into the GST Constitution Amendment Bill, Mr. Rather said. The Centre’s proposed draft does not have such a provision at present.
“We were surprised to know that the Centre has only agreed to one of our recommendations,” said Mr. Rather. The Union Government agreed that its share of the revenue from the GST would go to the pool of tax revenues that is devolved to States.
Mr. Rather, however, welcomed Mr. Jaitley’s announcement in the Lok Sabha on Wednesday on the payment of Rs 11,000 crore by April as compensation to States for the central sales tax (CST). “We are happy to know that the Centre has agreed to keep a provision of Rs 11,000 crore in the current year’s budget for CST.”
Later a PTI report said the Centre and the States on Thursday night made “some headway” in resolving the issues.
