No Consensus On GST...

GST deadlock continues over dual control, high sea taxes

The deadlock over the Goods and Services Tax (GST) continued on Wednesday with the Centre and states refusing to budge from their respective positions on issues like control of tax payers and taxing high sea trade, a stalemate that threatens to delay the rollout till September. The two-day meeting of the all-powerful GST Council, the 8th in a row, made little headway in brokering a solution even as non-BJP ruled states saw September as more likely deadline for the rollout of the indirect tax regime. 

The next meeting of the GST Council, headed by Union Finance Minister Arun Jaitley and comprising state representatives, on January 16 would discuss the issue of jurisdiction over assessees as well as try to reach a finality on taxation of territorial waters. Kerala Finance Minister Thomas Isaac said the other remaining issues before the GST Council include ways to fund the compensation to states for GST rollout and states participation in Integrated GST (IGST). "Working overtime, it should be possible to meet the deadline of September. I am not very optimistic about rolling GST out in June/July. Because it is a new tax and lot of complexity involved, it would be better to move in after full preparation. So GST, to my understanding, will be implemented from September," he said. Isaac said some states wanted the GST revenue from the highest tax bracket to be shared in 60:40 ratio with the Centre, instead of the present 50:50 sharing. "There are 4 different rates that have been fixed. Highest bracket is 28 per cent and of this how much will be the Centre and state's share, nowhere in the law it defines and it seems to be taken for granted it is 50:50. 

Ever since the Independence in the Centre-state financial relation the imbalance has been growing wider and states' rights have been curtailed. "That can be corrected by ensuring that state's share in GST will be 60 per cent. Many states also supported this. The Centre did not respond to the demand but it was decided to be discussed later," he said. Isaac said convergence has been growing between the Centre and states. "The Centre seems to be in a mood to rethink some of the positions that the Centre has been adopting... On the whole the Centre has been taking a step backward and if it really takes one more step backward I think we will have a deal."

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GST council fails to reach consensus on high seas tax

GST council meeting on Wednesday failed to reach a consensus on who will have jurisdiction over tax payers in the country and who will have right to tax products and services on high seas under the new indirect tax regime. These issues will be once again discussed in the next meeting of the GST Council on January 16. States want exclusive right to assess small tax payers be it for products or services and also want the right to impose tax on products and services in sea.

The failure of states and Centre to thrash out their differences even after series of meetings mean that it is virtually impossible to roll out GST by  April 1. However the Centre and the states will have to reach a middle ground by September to roll out GST as without it they will lose the right to tax as per the GST constitutional amendment passed in the parliament. Stating that the issue of territory is a complex one, finance minister Arun Jaitley said the area within 12 nautical miles into the sea is an Indian territory and a question is whose territory is it.

"Conventionally service tax and customs are charged by Government of India in those areas. Some states had, as far as fishing business is concerned the Constitution provides for fishing rights to states in that area. Some states have been levying taxes in the nature of sales tax/VAT," he said. Mr  Jaitley said since states have been levying these taxes, they want to continue to levy them, but the contra argument is that high sea area strictly doesn't fall within the definition of state and as per Constitution is an Union Territory. This issue is currently before the Supreme Court.

With regard to the issue of dual control which has been held up for long, he said a majority of states want to find a solution to the issue but the Centre would want to take every decision by consensus. "I have been consciously avoiding the voting. GST Council is a federal institution and a federal institution is a very delicate organisation. The fact that we have so far been able to resolve the issue by discussion, we want to establish this as a precedent of how the Council functions," he said.

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FM hopes to resolve dual control issue in next GST Council meet

Admitting that the Goods and Services Tax (GST) Council was racing against time on the government's implementation target of April 1, Finance Minister Arun Jaitley on Wednesday said it is hoping to resolve the vexed issues of Integrated GST (iGST) and dual control over assessees in its next meeting on January 16. "We know the difficulties, we are moving against time. Dual control is a complex issue. We started a discussion that was inconclusive. We have decided to meet on January 16 to untie the knots in this issue," Jaitley told here after the two-day GST Council meet. "We will be meeting to conclude the discussion on the gaps in draft laws. The gaps are on two issues. The first pertains to the definition of the word territory (in iGST) and the second is on dual control and cross empowerment," he said, reports IANS. Even after eight meetings of the GST Council, the deadlock continues between the Centre and the states on the vexed issue of "cross empowerment", or dual control of assessees. The question of who will exercise control over GST assessees -- the Centre or the states -- remains critical. The states want exclusive control on businesses with turnover below Rs 1.5 crore, including the service taxpayers. The impact of demonetisation on states' tax revenues was brought up at the GST Council meeting and Jaitley said that the states presented their estimates of December revenue figures based on collections made in November

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