Headline: Finance ministers ‘reach’ GST consensus

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Photo 1: Finance ministers discuss the upcoming GST bill

Photo 2: Central Finance Minister Arun Jaitley convened the meeting.

New Delhi: Making headway on the long- pending GST Bill, the Centre and States have agreed on the principle that the tax rate will be lower than the current levels even as the broad consensus emerged that the rate should not be part of the statute.

A meeting of the Empowered Committee of State Finance Ministers, convened by Finance Minister Arun Jaitley, also agreed to include in the Constitutional Amendment Bill the mechanism of compensating states for any loss of revenue in the first five years of Goods and Service Tax (GST) subsuming all indirect tax levies, including VAT.

There was also broad agreement on the principle that the ordinary businessman and the common man will benefit from introduction of the GST by way of lower tax rates while the states will not face any loss of revenue, West Bengal Finance Minister and the panel chairman Amit Mitra said after the meeting.

Also, there was “consensus to keep the GST rate out of the Constitutional Amendment Bill,” he claimed.

The government is keen to get the GST Bill approved during the current monsoon session of Parliament ending August 12 but is facing opposition from the Congress, which wants a low tax rate to be part of the Constitutional Amendment Bill while the one per cent additional tax in the hands of states over and above the GST rate to be scrapped.

“As you know, no tax rates are provided in the Constitution. It was discussed and the conclusion reached that the Union Finance Minister will communicate to other parties. He will explain it to them that it can’t come in the Constitutional Amendment but it can come in the GST Bill or GST Act,” Mitra said.

The “broad consensus put together is satisfactory to all political parties and all states,” he said, adding “fool proof” wording for compensation to states has been worked out.

There are indications that the government may now bring the GST bill in the Rajya Sabha next week.

Mitra said while there was no talk on a specific tax rate, it emerged at the meeting that the rate should be such that it is lower than existing levels, otherwise “there is no point of reform.”

The states, he said, were of the view that small businesses with turnover up to Rs 1.5 crore in a year should come under the purview of only state governments, and dual control of states and the centre can be exercised over businesses larger than these .