State govt reject Centre govt proposal to hike GST limit

The central government will have to iron out several issues with the state governments on Goods and Services Tax before it tables the GST Bill in the upcoming winter session of the parliament.

Differences between the state and the Centre continue on the threshold turnover for levying GST. The state governments, under the aegis of the empowered committee of state finance ministers on GST, have also reiterated that alcohol, tobacco and petroleum should be out of the GST regime.

The committee headed by Jammu & Kashmir finance minister Abdul Rahim Rather, met in New Delhi on Tuesday and stated its position on the threshold for imposing GST.

"The central government had written to the committee suggesting that the threshold annual turnover for levying GST should be raised. In September, the Centre wrote to us suggesting that this decision of the empowered committee should be reviewed. The Centre suggested that the limit should be Rs 25 lakh. Even if it is not Rs 25 lakh, Rs 10 lakh limit should be increased," said Rather.

However, the state governments had decided in August this year that the threshold should be fixed at Rs 10 lakh. "We will go by the decision that the committee has already taken," Rather said. The government plans to roll out GST on April 1, 2016.

The UPA government had introduced a Constitution amendment Bill for GST in 2011. However, the Centre could not arrive at a conclusion with the state governments on many of the issues. Even though the matter pertaining to the negative list was solved to a large extent during the previous regime, a major stumbling block was the central sales tax cut compensation pending to the states, which is over Rs 50,000 crore.

In fact, that is the bargain that finance minister Arun Jaitley has deployed. He has made it clear to the state governments that the Centre will pay back the dues in installments provided they come forward on the GST Bill. The finance ministry will move a Cabinet note soon to clear at least 25% of the amount due to the states in the winter session of the parliament.

"I have made it abundantly clear to the government because that will be in the true spirit of cooperative federalism. States should be carried along. If all goes well, the Constitutional amendment Bill is carried in parliament by both the houses, I think the 2016 target roll out date is achievable," Rather said.

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