Another step ahead to GST : Govt amenable to full compensation to states for 5 years

The gov­ern­ment appears ready to accept the demand for full com­pen­sa­tion to states for a peri­od of five years after intro­duc­tion of the pro­posed nation­al goods and ser­vices tax (GST).

By acced­ing to this view among the Rajya Sab­ha pan­el scru­ti­n­is­ing the con­sti­tu­tion­al amend­ment Bill for GST, the gov­ern­ment would be clos­er to get­ting region­al polit­i­cal par­ties on board for the major tax change. The Con­gress par­ty, how­ev­er, con­tin­ues to oppose the present Bill and is prepar­ing a dis­sent note to the report. Left rep­re­sen­ta­tives are also like­ly to dis­sent on sev­er­al clauses. 

The Bill had pro­posed full com­pen­sa­tion for three years, taper­ing to 75 per cent in the fourth year and 50 per cent in the fifth.

The pan­el is slat­ed to finalise the report next week. It could see a major­i­ty sid­ing with the gov­ern­ment, with the dis­senters like­ly to be lim­it­ed to Left, Con­gress and AIADMK, five of the 21 members.

The Con­gress wants removal of the pro­posed one per cent addi­tion­al tax, alco­hol and elec­tric­i­ty to be includ­ed under GST and an inde­pen­dent dis­pute set­tle­ment author­i­ty. Most region­al par­ties and the Left do not sup­port it on the extra tax. The Tri­namool Con­gress, Akali Dal and Sama­jwa­di Par­ty want to be allowed to con­tin­ue levy­ing own tax­es on tobacco.

The Con­gress is also demand­ing that the Cen­tre’s rep­re­sen­ta­tion in a GST Coun­cil to over­see imple­men­ta­tion of the new regime be reduced and states’ voice be increased to three-fourth. It also wants a GST Com­pen­sa­tion Fund. How­ev­er, it seems near­ly iso­lat­ed on these.

Since this is a Con­sti­tu­tion amend­ment, it requires a two-third major­i­ty in the Rajya Sab­ha (the Lok Sab­ha has already passed it) and then rat­i­fied by half the states. Whether the Bill will pass in the com­ing ses­sion is unclear, as the Con­gress has already made it clear that it will not let Par­lia­ment func­tion, rais­ing var­i­ous issues.

Cour­tesy: Busi­ness Standard