Centre, states to discuss IGST model

The states have sought more clarity from the central government on inter-state movement of goods under the proposed goods and services tax (GST) regime. Finance ministry officials are meeting state government officials on October 30 in Goa regarding this.

“The states want to discuss the Integrated GST (IGST) model with us because it is a bit complex. It will affect their administrative structure. This meeting has been called to improve their understanding of IGST,” said a finance ministry official. He said unlike other areas of GST, there were no dissenting voices on IGST, and the meeting was only to discuss how IGST would work.

The finance ministry had a round of discussions with the states on IGST in the last meeting of the GST Working Group in September. However, only seven-eight states, like Maharashtra, Gujarat, West Bengal and Assam, were represented. Other states wanted one more session.

On October 29, the Empowered Committee of state finance ministers on GST is meeting in Goa to take forward the discussions on changes to the Constitution for introding GST.

The GST model proposed by the Gujarat government is on the top of the agenda of this meeting. Gujarat has suggested the states be allowed to collect both central GST and state GST then transfer the Centre’s share after deducting their compensation amount. Though the Centre has already rejected the model, arguing it will challenge the basic structure of the Constitution, under which funds are to flow from the Union government to the states, the empowered committee wants to have a discussion on this.

Other key items on the agenda would be Article 279A and 279B of the Constitutional amendment draft, which deal with the formation of a GST Council, headed by the Union finance minister, and setting up of a Dispute Settlement Authority, respectively. The Centre redrafted these Articles after the states opposed veto power for the Union finance minister and a binding mechanism for settling disputes. However, the redrafted version also failed to impress the states.

A third area of discussion would be entry tax and octroi. The states and the Centre will have to reach a consensus on how these should be handled in GST. Initially, the Centre had proposed removal of entry tax, but it had to modify it after some states expressed concerns. No agreement was reached even on the revised proposal. Inclusion of petroleum products could also be discussed.