With several states suggesting changes in the model GST and compensation laws, the GST Council meeting scheduled for November 25 has been postponed to December 2-3.
The officers' committee of both the Centre and states, however, will meet on November 25 to finalise the three draft legislations -- CGST, IGST and compensation law. These will be placed in public domain for stakeholders' comments.
The Centre proposes to introduce these legislations as money bills to ensure they are not stuck in the Rajya Sabha where the ruling NDA does not have a majority.
Sources said that since the legal changes in the draft laws would take some time, it was decided to postpone the November 25 meeting of the all-powerful GST Council.
"The states have suggested certain changes relating to returns procedures in model GST law. Also, they have asked for changes in wordings in compensation law. We will finalise the three draft laws at the November 25 meeting," a source said.
The source, however, added that Centre is on track to introduce the legislations in the ongoing Winter session of Parliament, which ends on December 16.
The officers committee would not discuss the issue of cross empowerment to avoid dual control as it would be decided at the ministerial level.
Centre had on November 16 circulated the draft legislation among the states. The officers committee in their meeting on November 21-22 discussed the issue, with states giving their views.
The Central GST (CGST) will be framed based on the model GST law. The IGST law would deal with inter-state movement of goods and services.
Several state ministers were of the opinion that
compensation arithmetic would now have to be reworked as the Rs 55,000 crore compensation decided before demonetisation may not be enough as states revenues may take a hit.
West Bengal Finance Minister Amit Mitra said states may suffer revenue loss anywhere between 20-30 per cent in the third and fourth quarter of the fiscal.
He said the number of states which had to be compensated for loss of revenue may go up due to impact of demonetisation on their tax collection.
Jammu and Kashmir Finance Minister Haseeb Drabu said the GST Council can look into various options, including increasing the number of years for compensation from 5 to 6 or set up a revolving fund in case the amount shoots above Rs 55,000 crore.
Minister K Pandiarajan, representing Tamil Nadu, was of the opinion that there is "good chance" that compensation amount required would be more than the specified amount of Rs 55,000 crore.
The meeting did not discuss the quantum by which the total compensation would have to be increased post demonetisation.
Various multilateral agencies and RBI have lowered growth forecast for the current fiscal. RBI has reduced it to 7.1 per cent from 7.6 per cent earlier, while ADB expects the GDP expansion at 7 per cent, down from its earlier projection of 7.4 per cent, due to the impact of demonetisation on economic activities.
During a debate in Rajya Sabha, former Prime Minister Manmohan Singh had said that demonetisation would lead to dip in GDP growth by at least 2 per cent.
Jaitley said the states would be fully compensated for
any revenue loss for initial five years and the compensation law has to be approved by Parliament only.
"The basic draft of that has been approved. There was one clause in particular about the source of the compensation fund whose language will be redrafted and the legally vetted language will be placed before the next meeting of Council," he said.
Asked whether states have sought more GST compensation following demonetisation, Jaitley said the compensation is only related to GST implementation.
"Finally it was decided that compensation would be paid to states every two months," he said, adding that every state would try to collect their revenues.
In the January 3-4 meeting with state finance ministers, Jaitley will also hold pre-budget discussions.
Asked if demonetisation could derail GST discussion, he said, "We are living in a real world and politics is part of the real world and at the end of the day one has to assume that elected representatives in Centre and states have a sense of responsibility. So far, despite initial divergence of views it all ends with convergence".
In its three meetings the GST Council discussed the subsequent draft laws and the primary draft of the Central GST and State GST laws comprising of 197 provisions and 5 schedules has been approved.
"There were some portion which were left out because either some representation was made by state government or we could not reach a consensus... Now with regard to the draft only those blanks remain which relates to dual control and cross empowerment. Subject to that, the rest of draft has been approved," Jaitley said.
He said since there were some changes in the CGST draft, the language has to be given a legal shape and therefore the legally vetted copy of the draft will be circulated to all states.
"The CGST has to be approved by Parliament and SGST by the state legislatures. These two laws will be a mirror image of each other. So that is one important step which we have completed and a significant headway has been made," Jaitley said.
Asked about April 1 deadline, Jaitley said "I am trying my best to do that. I do not want to hasten the process of discussion and I do not want to delay the discussion".
