Rollout of GST from April 1 under a cloud

Doubts about an April 1, 2017 rollout of India’s most ambitious indirect tax reform were revived on Friday as the Goods and Services Tax (GST) Council failed to make substantial progress at its discussions.

The issue of dual control was not taken up by the Council, although the two-day meeting approved the primary draft of the Centre and State GST Bills.

“We are trying our best to meet the April 1, 2017, deadline,” said Finance Minister Arun Jaitley, after the seventh round of the Council concluded.

A number of State Ministers are understood to have sought a review of the planned rollout of GST from April and have instead called for its implementation from July 1.

The timeline for placing the Bills before Parliament and State Assemblies will be decided by the GST Council “once we cross all the bridges”, Jaitley said.

The issue of dual control and cross-empowerment through deliberations has proved particularly contentious between the Centre and the States.

“There is only one law and two bureaucracies, so the question is about how the jurisdiction will be divided for audit management,” he said.

The impact of demonetisation on revenue collections by the States, and the compensation by the Centre, are also understood to have been discussed at the meeting.

The Council approved the basic draft compensation law, but a clause on the “source of compensation” has to be redrafted. Jaitley, who chairs the Council, said it would be taken up at the next meeting.

It was also decided that the Centre would pay compensation to the States every two months as against the earlier provision of quarterly payments.

Jaitley, however, refuted concerns of some States such as West Bengal and Tamil Nadu that the demonetisation of ₹500 and ₹1,000 notes had impacted the revenue estimates of most States.

“States will be compensated 100 per cent of the loss that is directly attributable to GST implementation for a period of five years,” Jaitley stressed.

The Centre and the States had earlier agreed to a compensation package of ₹55,000 crore for losses arising out of the GST regime.

The next round of meetings will be held on January 3 and 4; the draft of the model Integrated GST (IGST) Bill and the thorny issue of cross-empowerment will be taken up.

The legally vetted draft of the law for compensation to the States will also be placed before the next meeting.

Jaitley will also hold pre-Budget consultations with State Finance Ministers during the next meetings.