GST: Government to promise states relief for five years; panel looking at 1% additional tax issue

Source: Economic Times

The government is set to promise compensation to states for five years after rollout of the goods and services tax (GST) in the Constitution Amendment Bill when it comes up in the Rajya Sabha, while other recommendations of the select committee will be taken up before the indirect tax reform is implemented.

Sources said that issues such as exempting certain services such as banking from the ambit of proposed levy would need to be decided by the GST council, which can only be set up once Parliament enacts the legislation. Similarly , an official said, the tax rate will also have to be decided by the council, comprising the Union finance minister and state FMs.

On the issue of levying up to 1% additional tax in manufacturing states, the officer said that a committee was already looking into the issue to minimize the cascading effect. The proposal was included at the behest of states, such as Gujarat, which were playing hardball in joining the GST net. The select committee had recommended a new definition of “supply”, which sources said would be included in the two other Bills -Central GST and State GST – that would be moved after Parliament and the states endorses the Constitution Amendment Bill.

The select committee had submitted its report to Rajya Sabha on Wednesday and the government is hoping to push through the Constitution Amendment Bill during the current session of Parliament as a further delay would mean the GST rollout missing the April deadline again. Most regional parties are now supporting the government on the issue although the Congress is still to agree to the plan.

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