States get in the way of merg­ing 12%, 18% rates

The Times of India (New Delhi edition) - - Times Nation - Sid­[email protected] times­group.com

Panaji: States on Friday protested against the Fi­nance Com­mis­sion’s sug­ges­tion to merge the two stan­dard rates of GST of 12% and 18% into one and also re­work the mech­a­nism for pay­ment of com­pen­sa­tion in fu­ture when the cur­rent sys­tem ends.

As part of the grant bar­gain at the time of in­tro­duc­tion of GST two years ago, the Cen­tre had promised to com­pen­sate states in case the rev­enue growth in a year was less than 14%. The com­pen­sa­tion is to be paid dur­ing the first five years of GST but states are now de­mand­ing that this should be ex­tended by an­other three years.

Fif­teenth Fi­nance Com­mis­sion chair­man N K Singh who met the GST Coun­cil mem­bers, com­pris­ing union and state FMs, sug­gested that the thresh­old for “rev­enue loss” be re­vamped once the “cliff is reached.” But state FMs, cut­ting across party lines, were not happy with the sug­ges­tion as they stand to lose rev­enue and will have to tighten ad­min­is­tra­tion to en­hance col­lec­tions. Singh is learnt to have pointed to the cur­rent sit­u­a­tion, where 21 of the 29 states are el­i­gi­ble for com­pen­sa­tion as rev­enue growth was un­der 14%.

Bi­har deputy CM Sushil Modi is learnt to have pointed out that this was the sit­u­a­tion only in the last few months. Pondicherr­y CM V Narayanasa­my said that the pro­posal was un­ac­cept­able.

Even on the other sug­ges­tion to merge the rates of 12% and 18%, there was near una­nim­ity that they should be left un­touched as items in the lower bracket, which are po­lit­i­cally more sen­si­tive, will see a re­vi­sion.

“It was the un­ful­filled quest of late Arun Jait­ley to dis­cuss pos­si­ble rate ra­tio­nal­i­sa­tion im­me­di­ately af­ter the gen­eral elec­tions,” a source in the Fi­nance Com­mis­sion said. The panel was of the view that there was a need to move to a three-rate struc­ture — with the stan­dard rate re­tained at 5% and a 28% levy on sin goods. The stan­dard rate, it had es­ti­mated could be 16%, sources said.

The panel is of the view that the cur­rent sys­tem needs to be re­viewed and Pun­jab FM Man­preet Badal and UP FM are learnt to have ap­pre­ci­ated the con­sti­tu­tional body’s stand. “It has been a race to the bot­tom with ev­ery meet­ing only talk­ing about a rate re­duc­tion. It is high time that we dis­cussed rate ra­tio­nal­i­sa­tion,” a source told TOI.

As­sam FM Hi­manta Biswa Sarma, how­ever, said that states are in favour of sta­bil­ity of rates and sug­gested that no sig­nif­i­cant changes in the struc­ture should be ex­pected till the Fi­nance Com­mis­sion sub­mits its rec­om­men­da­tions.

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