On Tuesday, the State Finance Ministers panel failed in reaching into a consent which would enable the government to have Constitutional Amendment Bill for GST (Goods and Services Tax) passed in the house of RajyaSabha.

The vital RNR (Revenue Neutral Rate) of taxation and also the capping of the rate of GST in the bill could not be accepted by many states when the State Finance Ministers Empowered committee had a meeting. About 15 to 15.5 percentage of RNR and about 17 to 18 percentage of standard rate of GST were suggested by the committee which was headed by Arvind Subramanian who is the Chief Economic Advisor.

According to what Thomas Isaac, Finance minister of Kerala, told the press after the meeting happened, every state had an opinion that the rates of tax proposed by Arvind Subramanian were not agreeable. However, they did not voice together what the rate actually should be. It could be 18% or more than that. This was the consensus all had come to.

Isaac also went on to tell that the rates must not have an adverse effect on the citizens and should also be beneficial to the state’s revenue. All of them agreed upon dropping the idea of RNR rate. He said that they would make sure of a rate and certain structure that would decrease the possible burden of tax on the citizens and also ensured that the decided rate and the structure would secure the revenues that exist in the states as well as the unions.

AmitMitra, Finance Minister of West Bengal and also the committee chairman told that as far as the rates were concerned, it was vital that certain wording be powered that would mean that the tax incidence on the common citizens should be considerably reduced. He also said that this must simultaneously secure the level of revenue trends that exist in states as well as the unions.

On the aspect of capping the rate of GST, which is a prime demand from the party of Congress, Mitra told that everybody agreed upon keeping the rate of GST out of the bill.

Mitra went on to say that no rates of tax are proposed in our constitution. It would be discussed and everybody reached a conclusion that Union Finance minister would talk to other existing parties. He would let them know that it cannot come under a constitutional amendment bill but in the act of GST or GST bill.

States ruled by Congress, on the contrary, did not flinch from their stand of capping the rate of GST in the constitutional amendment bill. HC Mahadevappa, a Karnataka Minister, told that the taxation of GST must be particularly brought in the bill so that the taxpayers know what the rates are going to be. All the states, however, came to a conclusion in the meeting on various other issues of mechanism of dispute resolution and dual control.

Mitra said that there often was a persisting issue about the dual control. The consensual conclusion of the finance ministers of the states was that about 1.5 crore rupees or less would be under the control of the state and this was told to the union finance minister. This implies that states would be the sole entities which would take care of small businesses that happen in the states. If the business is over 1.5 crore, a free methodology which is very consistent as been planned for both state and Centre to work in unison hand in hand pertaining to the generation of revenue.

The states also consented on the resolution of disputes to be carried out by the council of GST, contrary to the demand by Congress for a mechanism that works independently.

On the matter of compensation for the states, Mitra told that he was very happy to announce that a wording was worked out that would assure a compensation for five years. However he also told that he would not get into the details of it and could only pass the spirit of it saying that all the states were satisfies with the five year compensation guarantee if there occurs a loss in revenue. It is indeed a great development as an appropriate wording has been clearly defined.

According to Mitra, the states have also consented on removing the One percent extra levy that is to be levied during trade of goods between states that was proposed for constitutional amendment, so that it helps manufacturing states.

The GST bill for constitutional amendment is in the pipeline, waiting to be passed in the Upper house of Parliament as the government does not hold majority there. This bill proposal is probably going to be tabled during the monsoon session which is ongoing. After that, it must be consented by half of all the states.

In the meeting that happened on Tuesday, ArunJaitley, our Union Finance Minister, has supposedly appealed to finance ministers of all the states to make sure of the passage of the bill of GST in Rajyasabha, according to an official who was present in the meeting. He also said that Jaitley ensured states of taking care of all their concerns once the bill is passed.

Deemed to be the biggest reform of indirect tax in the country, the GST would subsume almost all of the state and central levies that include service tax, central sales tax, value added tax and also the excise duty. It would also add about two percent points to the gross domestic product of India

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