GST Council mulls cess on more items

Aims to compensate states for losses

The GST Council on Tuesday discussed increasing the ambit of cess to include more items, as states hit by demonetisation demanded 100% compensation from the Centre. The contentious issue of dual control was sidestepped once again. Earlier, it was decided to impose cess on the luxury and sin goods to garner more revenues for compensating states. This could now be widened to include more goods. The council also decided to create a separate compensation fund. Cess can now be imposed on larger number of commodities than just four, Kerala Finance Minister Thomas Isaac said.

Earlier, the revenue needs of the states were estimated to be Rs 55,000 crore but now with demonetisation leading to losses in states’ tax revenues, the compensation could go up to Rs 90,000, West Bengal Finance Minister and the head of Empowered Group of finance ministers on GST Amit Mitra told reporters after the meeting. He said an important issue of fitment could also not be taken up. Fitment refers to making indexation of goods for various tax brackets. Ministries including railway, civil aviation and IT gave their representation to the GST Council.

Commerce Minister Nirmala Sitharaman demanded exemptions for leather and plantation sector in GST regime to which most of the states disagreed saying exemptions would amount to compromising the spirit of GST. The council on the first day of its two-day meeting decided the IGST laws threadbare but discussion on a major issue of defining state for inter-state trade remained inconclusive. Finance Minister Arun Jaitley suggested the issue be referred for legal opinion to the law ministry. Until now states collected taxes on high sea trade for up to 12 nautical miles. Coastal states earned major revenues from this. In case of Gujarat, the revenues went up to Rs 1,200 crore per annum.

States said they were not ready to let this right go to the Centre in the proposed GST regime. While BJP-ruled states said they were hopeful that the supporting laws for GST could be passed in the Budget session of Parliament, other states said the deadline of April for roll out was not possible and it could go up to July.