Economy Jan 29, 2013
Bhubaneshwar: A day after resolving the contentious CST issue, state finance ministers today formed three sub-committees to look into other matters like IT infrastructure for smooth roll-out of the Goods and Service Tax regime.
"The deadlock over GST issue is now over. It is historic as there was a general consensus for introduction of GST," Sushil Kumar Modi, the chairman of Empowered Committee of Finance Ministers, told reporters here.
Though there was broad consensus over many features of the GST Bill, the Empowered Committee decided to set up three sub-committees to resolve issues which could not be agreed upon by the finance ministers of different states, he said at the conclusion of the two-day meeting of state finance ministers.
While one sub-committee will deal with integrated GST (IGST), another sub-committee to address issues relating to revenue neutral rates (RNR) and Place of Supply Rules (PSR). The second sub-committee will deliberate mostly on service tax rules, said Modi, who is also the Finance Minister of Bihar.
As state finance ministers sought complete withdrawal or reduction of Dual Control System to protect interest of small and medium traders, the Empowered Committee also decided to put the issue for verification of a sub-committee.
"The three sub-committees will give their reports within three months," Modi said adding the sub-committee on Dual Control will have to deliberate on the issues relating to exempted items and threshold for imposition of GST.
The Empowered Committee also resolved to suggest to the Finance Ministry to incorporate provision of allowing the states to opt out of the GST fold if they desired. "In the present GST Constitution Amendment Bill there is no such provision. We cannot force states to accept GST," Modi said.
Stating that there was a general consensus over the design and basic features of the GST, Modi said the states demanded the centre should not not hold rights to impose tax on declared goods like coal and LPG.
"The states want removal of this provision of declared goods from the Bill," he said.The state finance ministers during the two-day deliberation raised objection to petroleum products being kept out of the GST Constitutional Amendment Bill.
"The Empowered Committee is of the opinion that petroleum products should be kept within the GST Bill. Let the GST Council headed by Union Finance Minister decide on how to levy on petroleum products," Modi said.
The states demand for a "floor rate with narrow band" on GST design was accepted by the Government of India, Modi said adding the rate of tax on certain items across the country cannot be below a certain percentage and above a particular percentage.
Modi also announced that the Centre has agreed to allow flexibility to raise revenue by states during natural calamities and disaster situation. "Though the centre was initially hesitant to agree on this demand, finally they conceded," the Bihar deputy chief minister said.
The Empowered Committee also recommended introduction of special schemes for Jammu and Kashmir and North Eastern states. "We also proposed to the centre to define the term consensus for taking any decision by the Empowered Committee as some states had some objection to certain clauses in the Bill," Modi said.
The committee proposed to consider views of 50 percent states as board consensus.
The panel has suggested to Union Finance Ministry to convey to the Parliamentary Sanding Committee on Finance regarding the decisions and resolutions made at the state finance ministers meeting here, Modi said adding that certain issues may be inserted in the Bill.
"Successful implementation of the GST will add 1.5 percent to the country's GDP," Modi said.
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