The fifth meeting of the Goods and Services Tax Council got rescheduled to December 2-3, the second time in a month, as states wanted more time to finalise the legalities of the model GST and compensation laws.
The GST Council, comprising the Union Finance Minister and his state counterparts, were originally scheduled to meet on 9-10, which was later postponed to November 25. Now it has been shifted to December 2-3.
The decision to postpone the GST Council meet of November 25 was taken after deliberation between officers of central and state governments on November 21-22 in which states suggested some changes in the three draft legislations.
"Number of issues were resolved during the two-day meeting. However, the states desired some more time to internally deliberate on revised draft of the Laws within their respective state(s)," a finance ministry statement said.
However, the officers' committee of both the Centre and states will meet on November 25 to finalise the three draft legislations -- CGST, IGST and compensation law-- and thereafter place them before the GST Council on December 2-3. Centre had on November 16 circulated these legislation among the states.
"The states have suggested certain changes in the GST law and some wordings in compensation law," a source said.
The three draft legislations would be put up in public domain for stakeholders' comments after November 25.
The Centre and the states have been working overtime to introduce the CGST and IGST legislations and the compensation law in the ongoing Winter session of Parliament and sources say that these are going to come in as Money bills.
"These are taxation laws and as a norm such laws are introduced in Parliament as Money Bill," a source said.
The officers committee would not discuss the issue of cross empowerment to avoid dual control as it would be decided at the ministerial meeting, the source added.
The Centre is on track to introduce the legislations in the ongoing Parliament session, which ends on December 16.
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. The compensation law will list out how states will be compensated in the initial five years for revenue loss on account of GST rollout.
The Centre plans to create a Rs 50,000 crore fund for GST compensation by levying cess on demerit and luxury goods.
At its last meeting, the GST Council agreed on a four-slab structure - 5, 12, 18 and 28 per cent - along with a cess on luxury and 'sin' goods such as tobacco.
While the compensation was earlier proposed to flow from
the cess to be levied on luxury cars and sin goods like tobacco, demonetisation has led states to believe that more number of them would need support to make up for the revenue loss arising from GST roll out.
It was previously thought that 4-5 states will need compensation for revenue loss, the economic activity being impacted by demonetisation of 500 and 1000 rupee notes would necessitate support to even more states because of loss in tax revenues.
According to sources, the 'source of compensation fund' part of the law is being redrafted to say that compensation amount would be raised from cess and 'any other taxes as the GST Council decides'.
West Bengal Finance Minister Amit Mitra said initially the plan was to create a Rs 55,000 crore compensation fund, but post demonetisation situation has changed completely.
"Most states feel that their revenues will drastically fall in third and fourth quarters," Mitra said, adding that quantum of compensation is going to be much larger than Rs 55,000 crore.
The Finance Minister said all decisions have been taken through consensus so far and no decision has been taken through "vote or give and take. At the end of all the decisions, it is rationale that prevailed."
When asked if April 1 deadline still stands, 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".
On the issue of dual control, he said there is only one law and two bureaucracies so the question is how the jurisdiction will be divided for audit management.
"It will be resolved through deliberative mechanism," he added, adding today's meeting decided that compensation would be paid to states every two months.
As per the GST compensation to states, 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 of which language will be redrafted and the legally vetted language will be placed before the next meeting of Council," he said.
