Centre wins States’ crucial backing on GST amendments

State Finance Ministers endorsed the Constitution Amendment Bill for the Goods & Services Tax, with some tweaks, on Tuesday, giving the NDA government the upper hand in hardball negotiations with the Congress.

The Empowered Committee of State Finance Ministers, at its meeting with Union Finance Minister Arun Jaitley, rejected the Congress demand to cap the GST rates at 18 per cent in the Bill.

Except Karnataka and other Congress-ruled States, the others seem to have backed the government’s stand that the rates be kept out of the Bill.

The State Finance Ministers also accepted the government’s proposal –– and the Congress’ key demand –– to scrap the provision for 1 per cent additional tax on inter-State supply of goods.

Amit Mitra, West Bengal Finance Minister and Chairman of the Empowered Committee, said the Committee decided on the wording of the Bill to ensure that the Centre guarantees the States compensation for any revenue loss from the implementation of the GST for five years.

Sources said the Finance Ministry will now finalise the Amendments and take the Bill to the Union Cabinet as early as next week; this will give the government ample time to list it for discussion in the Rajya Sabha during the Monsoon Session.

At the meeting, the States informed the Centre that they do not want a revenue-neutral rate for taxation, and passed a resolution to protect their revenue while keeping the rates low.

“The incidence of tax on the common man has to be significantly lower with a safeguard on the existing level of revenue,” said Mitra.

Jaitley is likely to cite this resolution during his negotiations with the Congress. The Finance Ministry is understood to have indicated that States would be free to decide on rates and other modalities of the GST once the Constitution Amendment Bill is cleared by Parliament.

The States also unanimously shot down a proposal by the Centre for dual administrative control of small traders with an annual turnover of less than ₹1.5 crore. “There will be single control, and States will look after all these small entities on behalf of the Centre and the States,” Mitra said, stressing that this would be an “absolute requirement” from the States for the GST.