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Will GST miss yet another deadline? What is behind the delay?

business Updated: Jan 04, 2017 14:55 IST
Suchetana Ray

Finance Minister, Arun Jaitley at the 5th Goods and Services Tax (GST) Council meeting in New Delhi.(PTI)

It is now clear that the Goods and Services Tax (GST) will miss yet another deadline. As the demonetisation drive continues to cast a shadow on the deliberations of the GST council to implement the Goods and Services Tax.

At the end of day-1 of the eighth GST council meeting, several state finance ministers said that even a June or July deadline for rolling out GST looks impossible, with the number of issues that remain unresolved. The centre and the states are nowhere near consensus on a host of issues such as dual control, compensation and IGST.

Though the issue of compensation was already discussed and agreed upon in earlier meetings, the demonetisation initiative has reportedly spurred the states to demand changes in the law – including bi-monthly payment of compensation instead of quarterly.

At a previous meeting in October, the council had already fixed the compensation meant to be given to the states for the first five years after the GST is implemented. With 2015-2016 fixed as the base year, the likely compensation for states was based on a projected 14% revenue growth. But now the issue is back to the drawing board.

The other contentious issue is dual control, this will decide who taxes whom between the states and the centre. At the heart of this debate are states such as West Bengal and Tamil Nadu, which want control over businesses with an annual turnover of less than Rs 1.5 crore. But the Centre has refused to concede, stating that taking such a step would leave it with a very small pool of taxpayers.

The other issue that remains unresolved is interstate sale of goods and services that will constitute the IGST legislation. This is one of the many laws that needs to be ratified by state assemblies and the Parliament, before GST is rolled out.