GST delayed again? FM Arun Jaitley hints at trouble over dual control

With just little over four months being left for the introduction of the goods and services tax (GST) on the targeted date of April 1, 2017, Finance Minister Arun Jaitley hinted to a probable delay in the rollout of the indirect tax regime. However, Jaitley did assert that the Union government is making all efforts to roll it out from the targeted date. 

"We are making all efforts to introduce GST from April 1, 2017. GST has to be implemented latest by September 16, 2017, and if it is not implemented by then, then states will not be able to collect their share of taxes, and hence there is not enough scope to further delay in the decision," Jaitley said at the Economic Editors' conference on Thursday. 

Within these four and a half months, the Union and state governments have to resolve a deadlock over dual control on assessees under the proposed regime, evolve a consensus on model GST Bills and then pass it in Parliament and the respective state Assemblies in the winter sessions, frame rules, give time to industry to work out the nitty gritty. Further, the government also had to decide whether the GST Bills would be tables in the Parliament as money Bill or finance Bill. In the latter case, it would have to be ready for facing flak from the Opposition, particularly the Congress. 

The all powerful GST Council, which is chaired by the Union finance minister and has representation from the states, has already decided on a four-tier rate structure -- 5, 12, 18 and 28 per cent -- with a cess over and above the peak rate for luxury and demerit goods. 

"One of the objectives has been that, since the GST Council is a federal decision making process and the manner in which it functions in the initial years will lay down the precedent for the future rather than resorting to voting and division in every small issue. We have been trying to discuss, re-discuss and then reach a consensus and so far most of the major issues we have been able to resolve through consensus," Jaitley said. 

The issue of dual control, which deals with who will control which set of assessees under GST, has been holding back the negotiations. Jaitley and the state finance ministers will meet on November 20 to work out a "political solution" on the issue and the GST Council will formally take up the issue on November 24-25. 

"Only the last stages (of decision making) remain and I do hope we (GST Council) are able to resolve that through a larger consensus as well. And this form of functioning of the Council, where discussion and consensus is a preferred option, is a precedent we are trying to establish in a federal decision making body," he said.  

Earlier, the GST Council did reach a consensus that states will have the sole power over assessees up to 1.5 crore of annual turnover, beyond which both states and the Centre will have power to assess, scrutinise and send notices to these assesses in case of goods. For services, the Centre will have sole power in this matter over a threshold of Rs 20 lakh of turnover for the time being since states do not have skills in the matter as they currently don't impose service tax. 

However, that consensus broke down since states objected later saying that they also impose some service taxes such as entertainment tax and there are grey areas where stark distinction cannot be made between goods and services, such as in the construction sector. 

Subsequently, the Centre had proposed that both it and the states will have powers over assesses in goods as well as services, but the former would scrutinise less number of assesses. However, it would be taken care that there is no dual control over the same assessees. 

However, no consensus could be reached on the issue in the previous week's meeting and now the Centre and states will meet informally on November 20 to thrash out the issue politically. After that, the GST Council will meet on November 24, and 25, when it will also take up the issue of model GST Bills. The winter session of Parliament will begin from November 16.