NEW FLASHPOINT BEFORE GST TALKS

A storm is brewing in the Goods and Services Tax (GST) council over the Centre's comments against "badly managed" states for poor tax collections following demonetisation.

The finance ministry had said the indirect tax collections have taken a hit since December only in the "badly managed" states while others have shown an upward trend.

Some Opposition states such as Kerala, West Bengal and a few north-eastern states are likely to protest on the issue.

"Bengal has received the central government's highest award in integrated financial management system as well as e-taxation methods. So how can they say that we are badly managed, after rewarding us?" said a top functionary in the West Bengal government who did not wish to be named.

Data made available by states show a surge in value added tax (VAT) collection for most in November and December. West Bengal has shown a contraction in December while Arunachal Pradesh and Tripura saw lower tax collection growth in November, and Meghalaya saw a fall in December.

The Opposition-ruled states have already formed a cartel in the GST council to seek more negotiations before allowing the four pending GST-related bills to be passed in Parliament.

"We want a definition of state to help collection of taxes in states with a sea-border," said a GST council member who did not wish to be named. As the ninth GST council meeting is scheduled on January 16 here, several issues remain unresolved. Compensation and dual control are most important among them.

Though the issue of compensation was already discussed and agreed upon in earlier meetings, demonetisation has reportedly spurred the states to demand changes in the law — including bi-monthly payment of compensation instead of quarterly and 100% compensation instead of the earlier decided formula. And with this, the Compensation Bill has been jeopardised.

Dual control will decide who taxes whom between the states and the Centre. At the heart of this debate are states such as West Bengal and Tamil Nadu, which want control over businesses with an annual turnover of less than Rs.1.5 crore. But the Centre has refused to concede, stating that taking such a step would leave it with a very small pool of taxpayers.

Without putting the dual control debate to rest, the council cannot move on the other pending legislations; CGST, SG ST and IGST. 

-- Sources