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Note ban shadow over GST Bill

By Archis Mohan, Amit Agnihotri, Dilasha Seth
December 02, 2016 06:56 IST
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While the government has the option of ensuring the passage of these Bills as money Bills, there are voices within the government advising discretion on the GST roll-out by April 1, report Business Standard's Archis Mohan and Amit Agnihotri.
Illustration: Uttam Ghosh/

Illustration: Uttam GhoshForecasts about the adverse impact of demonetisation on the economy have weakened the Narendra Modi government's resolve to push the goods and services tax related Bills in the ongoing winter session of Parliament.

The Finance Minister Arun Jaitley-chaired GST Council will meet on Friday, not just under the shadow of protests by the West Bengal and the Kerala governments -- both of which are of the view that the time is not right for the GST rollout because of the brunt that state finances have suffered after demonetisation -- but also a 'wait and watch policy' of the Congress-ruled state governments.

While the government has the option of ensuring the passage of these Bills as money Bills, there are voices within the government as well advising discretion on the GST roll-out by April 1, 2017.

They have argued the new tax regime could prove to be a double whammy for trade, which is already looking at a slump in the near term because of the currency purge.

Senior government strategists, however, were hopeful of officials reaching an agreement that would help the government convince Opposition parties.

But if consensus eludes, the government could blame the Opposition for defeating, yet again, its fight against corruption and black money.

Some in the government -- if it is decided to defer introducing the GST-related Bills in this session -- don't rule out ending the session before its scheduled closure on December 16.

Parliament has been unable to transact any business, ever since the start of the session on November 16, and the Opposition parties showing little signs of relenting on their protests, the prospects of a smoother next week look dim.

The Congress Parliamentary Party is slated to meet on Friday morning to decide its strategy in the two Houses for the next week.

A last-minute rapprochement with the government aside, the party’s disruption of the proceedings on Thursday indicated it might persevere with its protests.

In the Rajya Sabha, Prime Minister Modi made an appearance when the House convened at 2 pm, but Congress Members of Parliament continued to demand an apology from the PM for accusing the Opposition of supporting black money.

Congress Vice-President Rahul Gandhi is likely to chair the meeting of the party's lawmakers, since party President Sonia Gandhi is unwell.

In deciding its strategy, the Congress would factor the support of its Bihar allies, the Janata Dal-United and Rashtriya Janata Dal, to the note ban.

The Congress will also discuss its strategy on the Taxation Laws (Second Amendment) Bill, which the Lok Sabha passed on Tuesday and the government introduced in the Rajya Sabha on Wednesday.

Even if the House does not discuss the 'money Bill,' it will be deemed passed after 14 days.

The Congress would weigh on whether it should let the House function, discuss the Bill and reject it, along with a united Opposition, to embarrass the government.

On GST, Congress insiders said they were awaiting the proceedings in the GST Council meeting on Friday.

Congress-ruled state governments will oppose the four-tier tax structure and the highest upper limit of 28% tax, against the 18% it has demanded.

The Congress vice-president is unmoved in his view of an 18% cap, having stated any percentage above this will adversely impact small traders and the aam aadmi.

As for the government, proroguing the House early has the added advantage of not waiting for 14 days to lapse before the Taxation Laws (Amendment) Bill is notified.

It can then issue an Ordinance the following day, and will get a wider window to collect unaccounted money for the Pradhan Mantri Garib Kalyan Yojana.

Demonetisation another GST headache

Administrative control has proved to be the most contentious issue in GST, reports Dilasha Seth/Business Standard

Demonetisation and division of turf between central and state officials seem likely to weigh heavily at the two-day Goods and Services Tax Council meeting beginning on Friday.

Chaired by Finance Minister Arun Jaitley, with states' finance ministers as members, it will debate the four draft GST legislations.

Approval to these is needed if they are to be introduced in the ongoing winter session of Parliament, crucial to meet the April 1 deadline for the GST roll-out.

The meeting might not be smooth sailing, with some states expected to raise stiff opposition over the demonetisation of high value currency.

"We hope for a consensus to emerge. If the bills are approved, we will try and table it in Parliament by next week," said an official.

The Centre will aim to create a consensus on the issue of dual control with states, by recommending division of a random 5% of assessees picked by a computer-based system for audit and scrutiny at the beginning of the year, instead of a division through a turnover-based threshold, termed horizontal division.

"As in the case of income tax, where the assessee does not know who the assessing officer is, there could be something similar in GST as well," said the official.

While there has been wide consensus between Centre and states against dual administrative control, there have been differences over division of powers.

States want sole administrative control over assessees with annual turnover up to Rs 1.5 crore (Rs 15 million) and division of control or cross-empowerment over that.

The Centre has had a stiff objection to that and pressed for cross-empowerment for all assessees. It will recommend a division of only 5% of assesees to be scrutinised.

"There should be no human interface. The 5% of assesees to be picked randomly for scrutiny or audit by a computer-based GST Network could be divided between Centre and states," said a senior official.

The Centre has offered alternatives in the draft model GST Bill to sort the turf issue, including the recommendation mentioned.

West Bengal Finance Minister Amit Mitra said on Wednesday that the timing was not right for GST implementation, given the impact on state finances because of demonetisation.

Mitra said the states were experiencing a huge fall in revenue as demonetisation had hit tax collections from hotels, transportation and small manufacturers.

'There is deep concern that the GST will not come to Parliament in a democratic manner. If it comes, it will come as a money bill... In every sphere, the democratic spirit is being violated by the Union government,' Mitra said.

Administrative control has proved to be the most contentious issue in GST, delaying the finalisation of legislation.

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Archis Mohan, Amit Agnihotri, Dilasha Seth
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