By Sanjay Thapa Jeet
A new twist is set to derail the implementation of the Goods and Services Tax (GST) from the earlier stipulated date of July 1, 2017. After last week’s GST Council meeting, the government had announced that it expects the implementation to begin before July 1. The Finance Minister, Arun Jaitley, had also exuded optimism towards its early implementation.
The centre vs the coastal states
[su_pullquote]The Centre had recently proposed that all revenue from activities up to 12 nautical miles from the coast would accrue to it.[/su_pullquote]
The expected reason for the delay in implementation is the continued protest by seven member states against the Centre’s move to usurp their tax revenues arising out of sea water assets and activities. The Centre had recently proposed that all revenue from activities up to 12 nautical miles from the coast would accrue to it. The collected amount would automatically be included within the central revenues under the Integrated Goods and Services Tax (IGST).
The states that have opposed the Centre’s proposal include Maharashtra, Tamil Nadu, Andhra Pradesh, West Bengal, Kerala, Gujarat and Karnataka. These states claim that they stand to lose over Rs 1000 crore of tax revenue as a result of the move. Andhra Pradesh has voiced protests saying that it stands to lose over Rs 600 crore annually. Along similar lines, Gujarat stands to lose over Rs 1200 crore of tax revenue, which it collects as a result of the sea-based activities that take place along its coast.
The Finance Minister, Arun Jaitley, had also exuded optimism towards the early implementation of GST | Picture Courtesy – The Financial ExpressCompensation for loss of revenue
The GST Council met last week, on Saturday, and approved the Centre’s formula for the compensation for loss of revenue to states arising from the implementation of the GST for the first five years.
The Council is expected to meet on March 4-5 to discuss the drafting of the legal provisions of the Central Goods and Services Tax (CGST) and IGST bills that will be tabled in parliament following the forthcoming resumption of the budget session. The states will then have to pass laws for the State Goods and Services Tax (SGST) in their respective legislatures.
What exactly does the GST entail?
[su_pullquote align=”right”]The Council gave its suggestions to the legal sub-committee which consists of central and state officials who will have to frame the various laws.[/su_pullquote]
The Council also gave its suggestions to the legal sub-committee which consists of central and state officials who will have to frame the various laws. The legal committee will frame rules and regulations for grievance redressal, settlement of disputes and the replacement of the existing state taxes for goods and services including VAT, sale tax, CST, luxury tax and entertainment tax, which will finally be subsumed at the national level. The Council had earlier passed the new rates of GST under four categories at 5 percent, 12 percent, 18 percent and 28 percent and a sin tax which is over and above these rates on luxury goods and services.
However, taxes on tobacco and alcohol, which make up a big revenue resource for states will be outside the ambit of the GST.