Is government readying for a half-baked GST?

Is government readying for a half-baked GST?

Finance Minister Arun Jaitley may have offered to compensate states for any loss of revenue following the implementation of the Goods and Services Tax (GST), but the concession is being criticised on various grounds.

The foremost concern is that the Centre for years has not been able to compensate states fully for their Central Sales Tax (CST) losses, which is just one component of many losses incurred by states and now making another promise for compensating on losses on all other fronts.

“Everything boils down to how robust the Centre’s financial position is. The Finance Minister must have done some cost-benefit analysis before committing to the states about compensation,” N R Bhanumurthy, Professor at the National Institute of Public Finance and Policy, said.

“My sense is that they (the government) are trying to reverse the prevailing sentiment in whatever form it is. Once it is done, then later they can always renegotiate with the states,” he told Deccan Herald.

According to the deal struck late on Monday evening, the Centre is expected to include a provision on compensation to states for any revenue loss due to GST in the Bill.

The Finance Ministry is expected to provide full compensation to the states on revenue losses for three years. After three years, the compensation will be partial for the next two years.

The Centre has also agreed to keep petroleum products out of GST, a major demand made by the states.

Critics say that keeping so many things out of GST and creating a complex structure of multiple layers is only going to make it difficult for the taxpayers.

The original idea of GST was mooted on the premise that it would make the tax system simpler, help in increased compliance, boost tax revenues and make exports competitive.

Changes in Companies Act

Against the backdrop of Saradha scam, Corporate Affairs Minister Arun Jaitley pushed for changes in the Companies Act as he piloted in the Lok Sabha a Bill which provides for severe punishment for those raising illegal deposits from the public.

Congress, on the other hand, wanted the bill to be referred to the Standing Committee for closer scrutiny.

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