GST compensation to be paid to States to be included in Constitutional Bill

The Cen­ter has agreed to include com­pen­sa­tion to be paid to states for Goods and Ser­vices Tax (GST) roll-out as part of the Con­sti­tu­tion Amend­ment Bill. The com­pen­sa­tion struc­ture would form a part of the Bill. It will be paid in tranch­es to the states. A con­sen­sus on this cru­cial issue will make it eas­i­er of the Cen­ter to intro­duce the GST Bill in the win­ter ses­sion of Par­lia­ment begin­ning Novem­ber 24.

The states would get six months to vet the GST Bill in the Assem­blies after its pas­sage by Par­lia­ment. While a sub-com­mit­tee on GST has sug­gest­ed that the rev­enue-neu­tral rate of GST be pegged at about 27 per cent, the states are yet to decide on it. It had sug­gest­ed states GST at 13.91 per cent and cen­tral GST at 12.77 per cent. Dif­fer­ences remain on thresh­old lim­it for levy­ing GST with states demand­ing that annu­al turnover for impos­ing the levy be Rs 10 lakh and Cen­ter demand­ing it to be at Rs 25 lakh.

The GST will sub­sume indi­rect tax­es like excise duty and ser­vice tax at the cen­tral lev­el and VAT on the states front, besides local levies. The GST Con­sti­tu­tion Amend­ment Bill, which was intro­duced in the Lok Sab­ha in 2011, had lapsed and the NDA gov­ern­ment will be required to come up with a fresh Bill. As regards the items exempt­ed from the purview of GST, the Empow­ered Com­mit­tee sug­gest­ed that they should be men­tioned in the Con­sti­tu­tion­al Amend­ment Bill.