GST Council fails to reach consensus on key issues, to meet again on Dec 11-12

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NEW DELHI: With just about two weeks to go in Parliament’s winter session, the Goods and Services Tax (GST) Council failed to reach a consensus on critical issues, including the laws that need to be passed in this session in order to stick to the April 1, 2017 rollout date set by the Centre for the new indirect tax regime.

“The meeting went on for a while and there were some suggestions, but we will discuss it further during the next meeting. Are we close to a resolution on this? I’ll keep my fingers crossed,” Union Finance Minister Arun Jaitley said at the conclusion of the two-day meeting of the GST Council on Saturday.

With the pending legislations, including the draft model GST law, as well as the contentious issue of dual administrative control over assessees between the Centre remaining unresolved, the GST Council would now meet over December 11 and 12.

“Our target is still April 1, and our options are anyway limited,” Mr Jaitley said. “The earliest we can bring it in is April 1 and the latest is September 16, which is five months and 15 days later.”

Demonetisation Shadow

While the effect of demonetisation on the economy and on the states is outside the purview of the GST Council, Mr Jaitley said that, on the behest of the state representatives, he wrapped up the Council meeting early and allowed the states to voice their grievances on demonetisation.

Some of the states, the Minister said, suggested an increase in the Fiscal Responsibility and Budget Management targets while others called for a relaxation of the ways and means limits.

“I am happy that all the states raised their voices on demonetisation,” West Bengal Finance Minister Amit Mitra told reporters following the meeting. “Because revenue will be affected. All states are also deeply concerned about compensation since earlier compensation was earlier based on the single issue of GST. Now there is the dual issue of GST and demonetisation.”

Earlier in the day, Kerala Finance Minister Thomas Isaac said that demonetisation would result in a fall in production worth Rs 2.5 lakh crore, adding that the cash crunch would also impact state revenues.

“Tax collection can be 50 per cent lower this month as there is no business in Delhi markets,” Manish Sisodia, Deputy Chief Minister of Delhi tweeted on Saturday. “If so, it would be hard to pay salaries of govt employees… same concern is being expressed by many state FMs in the GST council in the presence of Union Fin Minister.”

GST Rollout Calendar

Mr Jaitley said he would like all issues in the Council to be resolved by consensus. “So far, we have avoided a division,” he said. “I want to allow as much discussion as possible. We want to set a precedent of a deliberative democracy between the Centre and the states.”

“One would hope that there would be headway in the next Council meeting. It looks increasingly difficult to get the GST laws passed in the winter session of the Parliament. And if that doesn’t happen, then April 1 looks unlikely,” said Pratik Jain, partner and leader (indirect tax) at PwC India, stressing that this is a disappointing outcome for industry.