Centre, states fail to agree on GST rollout, decision on tax rate next month

  • Suchetana Ray and Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Oct 20, 2016 00:19 IST
Finance minister Arun Jaitley, flanked by with minister of state for finance Santosh Gangwar (right) and revenue ecretary Hasmukh Adhia, addressing the media after the 3rd meeting of GST Council in New Delhi on Wednesday. (PTI)

A decision on the goods and services tax (GST) rate will be taken next month, Union finance minister Arun Jaitley said on Wednesday after the Centre and states failed to arrive at a consensus despite discussions over two days.

Jaitley, however, sounded confident about rolling out by April the single nationwide tax to replace a string of local levies, hailed as one of the biggest tax reforms in the country.

The discussions were initially planned for three days.

“We will finalise the tax structure at the next meeting,” Jaitley said, adding the GST council, that includes representatives of all states, will meet again on November 3-4.

Officials said the discussions on Wednesday centred around a cess on “ultra-luxury and sin goods” that would be used to compensate states for any loss of revenue they may suffer in the first five years of introducing GST.

“The states could not come to a conclusion on whether a cess should be levied over and above GST. We have to come to a consensus on how the central government will garner the money to compensate the states,” revenue secretary Hasmukh Adhia told HT.

Before this is decided, GST rates or its structure cannot be fixed, he added.

This extra levy will come to around Rs 50,000 crore, ministry sources said.

Officials said the states sought more time to study the impact of the compensation formula and its impact on their exchequer.

The landmark tax reforms secured Parliament’s approval earlier this year after months of hard bargain between the BJP-led government and Opposition parties over the tax rate. The Congress had demanded a cap on the GST rate at 18%.

On Tuesday, the finance ministry had proposed a four-slab structure with two standard rates of 12% and 18%. Food items and other necessities would be taxed at 6% while luxury products would be taxed at 26%.

The Centre has set a November 22 deadline for finalising the GST structure.

“We know it’s a daunting task to finish this in the next meeting (to fix GST rates with full consensus of states), but we will accomplish it,” Adhia said.

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