Tough Road Ahead for Timely GST Rollout

Rollout of the GST regime may only be possible by June-July, as the possibilities of meeting the April 1 deadline are bleak now in view of the negative impact of demonetisation on states' tax revenues, some GST Council members said.

NEW DELHI: "Rollout will definitely not be in April. If the Goods and Services Tax (GST) bill is passed in the Budget session of Parliament, then June or July could be a possibility," Kerala Finance Minister Thomas Isaac told reporters in New Delhi at the end of Day 1 of the Council's meet.

West Bengal Finance Minister Amit Mitra said that the council could not reach a consensus on defining a state's jurisdiction under the Integrated GST (iGST) and has not even resolved the dual control issue, which is fundamental to the indirect tax regime.

"Today's discussion veered around major issues relating to the iGST. We could not reach a consensus on defining the state's jurisdiction, i.e. whether states can charge GST within 12 nautical miles from the state or not.

"I don't want to make predictions on the timeline, but we have not yet passed the iGST," Mitra told reporters after the meet.

The iGST will now go to the Law Ministry for its opinion on the jurisdiction over the 12 nautical miles distance from the state.

"We haven't been able to even touch the dual control issue, which is fundamental to this process. This will be taken up tomorrow (Wednesday). Once the council passes the draft GST law, rules have to be framed," Mitra added.

The issue of dual control or cross empowerment, which deals with assessee's jurisdiction, has been a major bone of contention between the Centre and the states, and the Council has been unable to find a common ground on it so far.

The Kerala Finance Minister on the issue of dual control said that the state is very firm that dealers and service providers below Rs 1.5-crore turnover should be entirely under the state's control.

The Day 1 of the council meet also saw various sectors, like telecom, banking and insurance, make presentations to the Council and asking for a single registration under the GST.

Mitra said that states' tax revenues have fallen around 30-40 percent owing to the depressive impact of the November 8 demonetisation measure, which has complicated the issue of compensation to states for future losses arising from the GST implementation.

"The model of compensation under GST from a separate cess-funded corpus of Rs 55,000 crore that the GST Council had decided on is no longer valid, because now after demonetisation, everybody's compensation will go up," he said.

"If you assume a 30 percent decline in tax revenues, instead of the earlier four-five states, which were assumed as requiring compensation because they did not have the minimum annual 14 percent growth in tax revenue, now 10-12 states will require compensation," Mitra said.

Noting that the compensation fund would, therefore, require to have a much larger corpus of around Rs 80,000-90,000 crore, Mitra also said that the GST Council will now take a call about the Centre taking responsibility for fully compensating states for the loss of revenue.