GST: Govt amenable to full compensation to states for 5 years

Congress preparing a dissent note on the issue

The government appears ready to accept the demand for full compensation to states for a period of five years after introduction of the proposed national goods and services tax (GST).

By acceding to this view among the Rajya Sabha panel scrutinising the constitutional amendment Bill for GST, the government would be closer to getting regional political parties on board for the major tax change.

The Congress party, however, continues to oppose the present Bill and is preparing a dissent note to the report. Left representatives are also likely to dissent on several clauses.

The Bill had proposed full compensation for three years, tapering to 75 per cent in the fourth year and 50 per cent in the fifth.

The panel is slated to finalise the report next week. It could see a majority siding with the government, with the dissenters likely to be limited to Left, Congress and AIADMK, five of the 21 members.

The Congress wants removal of the proposed one per cent additional tax, alcohol and electricity to be included under GST and an independent dispute settlement authority.

Most regional parties and the Left do not support it on the extra tax. The Trinamool Congress, Akali Dal and Samajwadi Party want to be allowed to continue levying own taxes on tobacco.

The Congress is also demanding that the Centre's representation in a GST Council to oversee implementation of the new regime be reduced and states’ voice be increased to three-fourth. It also wants a GST Compensation Fund. However, it seems nearly isolated on these.

Since this is a Constitution amendment, it requires a two-third majority in the Rajya Sabha (the Lok Sabha has already passed it) and then ratified by half the states. Whether the Bill will pass in the coming session is unclear, as the Congress has already made it clear that it will not let Parliament function, raising various issues.