FinMin says govt open to scrapping 1% additional tax

The government would consider doing away with the proposed one per cent additional tax on inter-state sale under the goods and services regime, a senior finance ministry official said on Tuesday. The statement came a day before Finance Minister Arun Jaitley addresses the industry on Goods and Services Tax (GST) on Wednesday.

"If after consultation with various industry and political parties, it is felt that we should drop one per cent additional tax, then we are open to it," said Rashmi Verma, special secretary, department of revenue, in her address to an event organised by industry body Assocham.

"I also agree with one per cent additional tax going (away), GST structure will improve considerably, because even if it is going to be there for only two years, there will be some amount of cascading effect," she added. Verma, however, pointed out that the government has already made changes in the constitution amendment Bill on GST, to minimise cascading effects of one per cent additional tax on inter-state movement of goods. The government had earlier incorporated one per cent additional tax on goods to woo manufacturing states for GST. However, after opposition, a select panel of the Rajya Sabha recommended it be confined to inter-state sale of goods and not branch transfer.

The revised Bill has this provision.

"There are a number of opinions about proposed one per cent additional tax. The select committee, which looked into it, also gave its recommendation, which we have accepted and with that, the cascading effect will be minimised because the one per cent additional tax will now be only on sale, and not on supply of goods," she said.

Verma also said the draft model law on GST will be finalised in a month's time.

"We are also working on draft GST model law. The draft which has been put up by someone in public domain is not the official one. In fact we are still working on it. It will take one more month," said Verma.

The finalised draft will be put in the public domain and the similar process of consultation with trade bodies will be done.

Once the Constitution amendment bill to roll out GST is passed by Parliament, the Centre and states will have to adopt their own law to give effect to the new indirect tax regime.

On dispute resolution mechanism, Verma said GST council will not decide on the dispute but will only look at the modalities.

"So what would be an independent mechanism for dispute resolution will be recommended by the GST council. It can be in the form of tribunal, authority or others. The council itself would not be resolving the issues", she said.

The Congress has demanded scrapping on one per cent additional tax on inter-state sale of goods as well as putting in place a mechanism for dispute resolution. End