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State-centre consensus on key GST issues, says FM; Cong bickers
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State-centre consensus on key GST issues, says FM; Cong bickers


Finance Minister Arun Jaitley today held a meeting with state finance ministers to iron out differences on the goods and services tax (GST), saying that consensus had been reached on a number of issues bogging down the reform, such as whether the rate should be capped in the Constitution.A decade in the making, the ambitious GST will replace almost all central and state-level indirect taxes and levies, and is expected to result in lower taxes, eliminate cascading taxes (tax on tax), improve compliance and widen the tax base.It has however run into opposition from some states, which fear handing over their tax power to the Centre, and from the bill's author Congress party, which says the BJP is diluting its nature, and has made three demands of it before supporting."The idea of the meeting was to lay down further roadmap with respect to how to proceed with the GST. Twenty two state finance ministers attended the meeting and there were representatives from all states and union territories. Everyone contributed with their views," Jaitley said at a press conference following the meeting.He was flanked by West Bengal Finance Minister Amit Mitra, who is also the chairman of the Empowered Committee of State Finance Ministers on GST. Mitra, whose TMC party has pledged support to the GST, said the FMs will meet again in the second week of July to discuss the revenue neutral rate (RNR).Among key issues that were discussed today were the subject of revenue loss to states arising from the rollout of the proposed tax reform, whether there should be an additional 1 percent additional tax on top of GST and whether the rate should be capped in the Constitutional Amendment Bill.The last two demands are close to the Congress, which seeks abolition of the proposed 1 percent additional tax and seeks capping of the GST rate in the Constitution. (Its third demand is to have disputes arising from GST referred to a judicial panel instead of a governing council.)The BJP has said it is open to doing away with the contentious 1 percent tax -- which was proposed to placate agitated manufacturing states such as Tamil Nadu and make up for their losses -- but Jaitley said consensus has been achieved that the Constitutional rate should not be capped.Experts have said capping the GST rate would be problematic considering that the central government would have to amend the Constitution each time if it has to increase the rate over the cap."What the government is telling the principal opposition is that it is either my way or the highway. And that is not how Parliamentary processes work," Congress spokesperson Manish Tewari said. "The government is completely and absolutely inflexible."To be sure, the NDA government, which is in a minority in the Rajya Sabha, might now be able to pass the GST bill without the Congress' support, if some large regional parties are in agreement."It seems like the meeting today was positive," said Pratibha Jain of Nishith Desai Associates, "but there continues to be disconnect between Congress and BJP."On the subject of the revenue neutral rate, PwC India's Pratik Jain said the 18 percent figure that has been mentioned was "quite reasonable"."Today, excise duty is 12.5 percent and VAT is 13-14 percent. So the GST rate would be lower for most sectors barring some like FMCG," he said.


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