CA Pradeep Jain, CA Preeti Parihar, Neelam Jain
Goods and Services Tax (GST), the 122nd Constitutional Amendment Bill, 2014 tabled by Finance Minister Arun Jaitley has already passed in the Lok Sabha. However, due to conflicts between the States and Centre and the reason that the Centre is not having majority in Rajya Sabha; GST bill is lying on the tables of Rajya Sabha since past few months, awaiting the clearance therefrom. What are the reasons of conflicts between the States and Centre? What steps are taken by the Centre to make the States affirmative to GST implementation? Why the states are taking so much time to give green signals to GST bill? This article is an attempt to find answers to some of these questions.
TAXING POWERS OF CENTRE & STATES – PRESENT STATUS:-
Under present scenario, Centre is empowered to levy and collect following Indirect taxes:-
Indirect Taxes levied and collected by States are as follows:-
Besides these taxes, State government is also empowered to levy other indirect taxes like Entry tax, Entertainment tax, Luxury tax, Electricity tax, stamp duty, etc which are normally entrusted to local bodies prevailing in the states.
TAXING POWERS OF CENTRE & STATES – AFTER IMPLEMENTATION OF GST:-
In the GST bill, the constitutional amendment has been proposed to empower the Centre and States simultaneously to levy and collect indirect taxes on the entire chain from the stage of manufacture till the sale to ultimate consumer of goods/services. Thus, after implementation of GST:-
FEAR OF STATES:-
As each thing has its own pros and cons the GST also brings with it many consequences which makes its implementation a tough challenge for Modi Sarkar and the GST proposal is presently receiving severe opposition from some states even those ruled by the BJP government because of their very reasons. Here the important thing to consider is that Why the states are so worried about the upcoming GST? Some of the fears of States are:-
NO SUCH HUGE LOSS TO STATES – CENTRE’S VERDICT:-
On the one hand, States are worried and opposing GST on the grounds that it will take them to the ocean of huge Revenue losses; on the other hand, the Centre says there will not be such a huge loss. The reasons stated by Centre for this verdict are summed as follows:-
COMPENSATION OF LOSSES FOR 5 YEARS – A STEP TO SEEK ‘YES’ OF STATES:-
It has been assured by Finance Minister that States will not suffer much loss due to implementation of GST. The reasons for this assurance have already been discussed in the forgoing para. However, if there is any loss anyhow, the Centre has promised to compensate the same for first five years. The compensation will be as follows:-
For first 3 years – 100%
In fourth year – 75%
In fifth year – 50%.
This assurance is said to be the most important step taken to make the States agree for implementation of GST. However, it is expected by Centre that all states may not require compensation for five years; particularly the Consuming states; which will enjoy the revenue increase with the implementation of GST.
Introduction of GST have the drastic impact on the present taxation system of our country as it subsumes most of the Indirect Taxes. However, the States are not able to accept the change so easily. The provision of compensation for five years may make them affirmative towards GST. But at the same time, effective measures are required to be taken so that this provision may not be misused by the States. However, at present, what the Centre wants is only one “Yes” from the States. Once the GST bill is passed, it is hoped that all the demerits associated to it will be coped by effective drafting of the GST Act and its implementation.