GST deadlock over, states resolve issues

Paving the way for an early rollout of Goods and Services Tax (GST), the states on Tuesday reached a broad consensus on the design of the new indirect tax regime under which they will be free to decide on the time of its introduction.

Consensus over the major roadblock comes a day after a resolution was reached on the contentious issue of CST compensation with the states agreeing to accept a lower package of Rs 34,000 crore.
“The deadlock over GST issue is now over. It is historic as there was a general consensus for introduction of GST,” Chairperson of the Empowered Committee of State Finance Ministers and Deputy Chief Minister of Bihar Sushil Kumar Modi said.

At the two-day meeting of state finance ministers, Modi said that it was agreed that instead of a single rate for GST there would be a floor rate with a band, giving freedom to state governments’ to fix their own rates.
With regard to another issue of Dispute Settlement Authority (DSA) in the GST Bill, Modi said the Centre has also agreed to do away with the provision. Instead, he added, there would be a GST Council to resolve the disputes. States had serious reservations on creation of a Dispute Settlement Authority (DSA) in the Constitution to prevent deviations in the structure, as they feel disputes can be resolved through consensus rather than a DSA with such level of authority.

The DSA, as proposed in the Bill, was to deal with grievances of the Centre and the states with regard to GST. The body would consist of a chairperson and two other members.

The empowered committee also decided to suggest to the finance ministry to incorporate provisions for allowing states to opt out of GST regime, he said, adding “in the present GST Constitution Amendment Bill there is no such provision. We cannot force states to accept GST.” Modi said that taxation of petroleum products would not be included in the GST legislation, giving freedom to states to impose the levy.

Stating that there was a general consensus over the design and basic features of the GST, Modi said the states demanded the Centre not to hold rights to impose tax on declared goods like coal and LPG. “The states want removal of this provision of declared goods from the Bill,” he said.

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