GST to face rough weather on payoff, administrative control

April 1 deadline looks unlikely; states demand tax on high sea sales, higher compensation

The goods and services tax (GST) Council will take up the tricky issue of division of administrative turf between the Centre and states in the proposed indirect taxation system on Wednesday, even as many states signalled sticking to their stance of having a control over small dealers. The states are also digging in their heels to ask for more compensation, as they are hit by demonetisation, clearly giving signals that the April 1 deadline is likely to be missed.

However, some Bharatiya Janata Party-ruled states did not rule out the possibility of meeting the deadline, though it would be quite difficult even if the GST Bills are tabled in the Budget session, likely from January 31. 

Commerce & Industry Minister Nirmala Sitharaman on Tuesday made a presentation to the Council, urging for low rate of taxation for special economic zones, plantation crops as well as leather and cement industries. Representatives of aviation, information technology and other sectors also made presentations to the Council. 

The Council on Tuesday took up the integrated GST (IGST) Bill and almost cleared it. The issue of dual control cannot be settled unless there is clarity on IGST Bill. 

There is an issue in IGST – whether the states can share the administrative power on assessees involved in inter-state movement of goods and services – which is yet to be settled. 

“States also want a share in IGST,” Kerala Finance Minister Thomas Isaac said. He said states stick to their demand of controlling assessees with annual turnover of Rs 1.5 crore. 

The issue of dual control over a single assessee has been hanging in the balance for long. 

Against the demand of states, the Centre has proposed to have control of both the Centre and states over assessees with a predetermined ratio. 

The issue of dual control will be discussed on Wednesday. Haryana Finance Minister Captain Abhimanyu told reporters that if the issue is resolved, only procedural formalities will be left to be ironed out. 

Delhi Deputy Chief Minister and Finance Minister Manish Sisodia said it’s difficult to meet the April 1 deadline for GST.

Isaac saw June or July as the probable months of rolling out GST. 

However, Abhimanyu said April 1 still remains a possibility for introducing GST though it will be tenuous. 

Besides administrative control, the sum of compensation is becoming a prickly issue. 

West Bengal Finance Minister Amit Mitra demanded a higher sum than the expected Rs 55,000 crore a year, as state finances faced repercussions from the cash crunch after demonetisation. 

Union Finance Minister Arun Jaitley had said that there would be no cap on the compensation amount, although he sought to distinguish between the one that sought under GST and the one being demanded due to demonetisation. 

The definition of coastal states under GST is also becoming a vexed issue. 

Isaac said the definition of territorial waters by the Centre was not acceptable to the states. The Centre wants to take 12 nautical miles beyond coasts as Union Territory and tax any item sold there. Coastal states are averse to this.