GST rollout possibility recedes toward September

New Delhi, Jan 4 (IANS) Admitting that the Goods and Services Tax (GST) Council was racing against time on the government's implementation target of April 1, Finance Minister Arun Jaitley on Wednesday said it is hoping to resolve the vexed issue of dual control over assessees in its next meeting on January 16, even as states indicated a September timeline for GST.

"We know the difficulties, we are moving against time. Dual control is a complex issue. We started a discussion that was inconclusive. We have decided to meet on January 16 to untie the knots in this issue," Jaitley told reporters here after the two-day GST Council meet.

"We will be meeting to conclude the discussion on the gaps in draft laws. The gaps are on two issues. The first pertains to the definition of the word territory (in Integrated GST) and the second is on dual control and cross empowerment," he said.

Even after eight meetings of the GST Council, the deadlock continues between the Centre and the states on the vexed issue of "cross empowerment", or dual control of assessees and who will exercise control over them.

The states want exclusive control on businesses with turnover below Rs 1.5 crore (the current threshold for central excise), including the service taxpayers.

The impact of demonetisation on states' tax revenues was also brought up at the meeting and Jaitley said that the states presented their estimates of December revenue figures based on collections made in November, the month of the demonetisation announcement.

"A number of state finance ministers gave details of how revenue has actually increased in their states during this period. We've asked for detailed data in this regard," he said.

To a query on the impact of the November 8 demonetisation of high-value currency, Jaitley said that excepting the next quarter of the fiscal, the demonetisation-led process of "integrating the informal economy into the formal one" will actually result in higher revenues.

"We will end this year with higher revenues...in both direct and indirect taxes we'll exceed the budget estimates," he added.

Instead, declining to set a dateline for implementing the Goods and Services Tax (GST), West Bengal Finance Minister Amit Mitra said demonetisation has hugely impacted states' tax revenues, while Indian industry itself required more time to prepare for the new indirect tax regime.

"States are making presentation to the Union Finance Minister, saying we're not geting any money from the Centre," Mitra told reporters.

"We could not pass the iGST law. There was no discussion on the dual control issue... the states' right to jurisdiction over small businesses with less than Rs 1.5 crore turnover. All that has still to be discussed.

"We cannot have a GST that is non-sustainable, a GST that does not work," he added.

Pointing out that Indian industry has said it is not fully ready for the roll-out of the GST regime, Mitra told reporters that the question on a GST timeline was better addressed to Jaitley.

"A number of steps have to be taken for business to prepare, of which there is no sight. Upgrading of companies' ERP (enterprise resource planning) is yet to take place.

"Besides, no fitment has happened," he said, referring to the alignment required to the GST tax rate structure that has been decided.

The possibility of roll out of GST has moved further to September as a new issue has cropped up - the states' demand for an increased share in the new indirect tax collections, Kerala Finance Minister Thomas Issac said.

"I am not very optimistic about GST rolling in June or July. It is better to move to GST after all the preparations are done. To my understanding it will be implemented September onwards," he told reporters here.

Raising new issues between the Centre and the states, Issac said that the Council members discussed the four tax slabs under the GST and the states felt that the states and Centre share in the taxes should be 60:40 and not 50:50.

"Over the years, states' rights have been curtailed. This presents a historic opportunity to correct the states' share to 60 per cent and Centre's share would be at 40 per cent. The states today (on Wednesday) supported this understanding," he added.

Four tax rates of 5 per cent, 12 per cent, 18 per cent and 28 per cent have been decided under the GST regime.