States fail to iron out differences over GST

State finance ministers on Friday failed to iron out certain minor differences over the proposed Goods and Services Tax (GST), days before start of a crucial session of Parliament that has to pass a law for the new regime to come into force from April next year.

The Empowered Committee of State Finance Ministers did not discuss the GST rate but referred to a sub-committee the issue of threshold below which small businesses would be exempted from the new levy.

Delhi Deputy Chief Minister Manish Sisodia, who chaired Friday’s meeting, said the states were “divided” over the threshold. While the Centre is of the view that threshold for levying central GST (C-GST) and state GST (S-GST) be kept at an annual turnover of Rs 25 lakh, some small states want it to be at Rs 10 lakh. “Some states are adamant that it should be Rs 10 lakh. Some others said it should be increased because inspector raj will increase if small traders come under GST... So, we thought that we should collect data from all states,” Sisodia said. The GST Bill, which will subsume all indirect taxes to create one rate and integrate the country into a single market, has been approved by the Lok Sabha and is pending approval of the Rajya Sabha. After the Constitutional Amendment Bill is approved by the Rajya Sabha, the Bill needs approval of half of the state legislatures before it can become a law. 

The government is hoping to get the bill approved in the winter session beginning on November 26 and complete the other necessary legislative work by March 31. Moreover, the Empowered Committee of State Finance Ministers will meet next month to decide on a new chairman, Delhi Deputy Chief Minister Manish Sisodia, who chaired Friday’s meeting, said. The states discussed the threshold limit for levying GST and setting up a new sub-committee to collect data from states to decide on the same.

“The Empowered Committee will in its next meeting in the presence of Finance Minister Arun Jaitley decide on the chairman... The meeting should happen in December,” Sisodia told reporters here.

Selection of a new chairman has been necessitated by the incumbent Kerala Finance Minister K M Mani’s resignation earlier this month in the wake of a High Court ruling against him in the bar bribery case. On threshold, Sisodia said there is a “divided opinion” among states. States, he said, have two options -- raise the number of tax payers or decrease the number and levy higher taxes. “Based on data, a decision would be taken so that it should not be on the basis of prejudice. The sub-committee would submit its report before the next meeting,” Sisodia added.

Although the government had planned to roll out GST, which is billed as the most comprehensive indirect tax reform since Independence, from April 1, 2016, it looks difficult as the Constitution Amendment Bill is stuck in the Rajya Sabha where the ruling NDA does not have a majority.

With the winter session of Parliament beginning November 26, the NDA has to work out a strategy to seek Congress support for passage of the legislation. The Empowered Committee was in Australia recently, Sisodia said, and the learning from there was to make GST simple and important for 

effective implementation. He also said Delhi is comfortable with GST rate at 25 per cent.