Government launches final GST push

A day after a crucial meeting with states on the goods and services tax, the Modi government moved swiftly to incorporate the deliberations in the Constitution amendment bill, while addressing one of the three demands raised by the Congress.
But while accommodating the Congress by doing away with the plan for a 1% additional levy , the government held firm on two other issues by not capping rates in the proposed legislation and leaving dispute resolution to the GST council. The decisions seem intended to send a strong message that the central government will try to push the bill in the current session of Parliament.
The government is likely to hold formal talks with the Congress on GST amendments on Thursday , amid indications that informal parleys have been on the right track. Once the issues are settled with the principal opposition party, the government is expected to call an all-party meeting for an across-the-spectrum consultation on the vexed indirect reforms legislation.
Finance minister Arun Jaitley, who is meeting party leaders individually , hosted West Bengal chief minister Mamata Banerjee for lunch at his residence on Wednesday. Last week Jaitley had met Bihar chief minister Nitish Kumar who backed the Centre's formulation on keeping the tax rate outside the legislation.
On Wednesday , the Cabinet accepted the proposal to drop the additional levy of 1% by manufacturing states such as Gujarat, Maharashtra and Tamil Nadu as a compensation for possible revenue loss. This was one of the three demands of the Congress. Reflecting the consensus at the meeting of state finance ministers on Tuesday , the government opted against capping the GST rate in the Constitution Bill as it would reduce flexibility to alter rates in the future, said a senior official. Similarly , it has not changed the dispute resolution mechanism, a power that will be vested with the GST Council that is to be the apex body comprising representatives from all states and the Centre.
Sources said government will also address the concern over dual control as some states such as West Bengal want that units with turnover of up to Rs.1.5 crore should not be burdened with onerous compliance norms. A solution is expected to be provided in the rules to the laws.
Accepting the decision of the empowered committee of the empowered committee of finance ministers on GST, the revised bill has a clearer language assuring full compensation to the states for five years for any revenue loss that may arise. GST will subsume all indirect taxes, including VAT.
The eagerness to move ahead with the bill comes amid suggestions from some Congress leaders that the government was itself not keen on implementing GST that has been discussed for a decade now.The issue was not on the Cabinet agenda that was circulated to ministers but was taken up later.
The amendment to the Constitution ­ which was cleared by the Lok Sabha in May ­ is the most crucial legislation, which will be backed by three other bills. Besides, the tax rate will only be decided once GST council decides and the panel can be set up only after the Constitution is amended.
In the new regime, there will be one Central GST and State GST. States levy sales tax or VAT on goods sold within their jurisdiction and get a Central Sales Tax (CST) on sales made outside their territories. CST will also go away in the new regime and 1% additional levy is proposed to compensate states.