GST needs to surpass the dual control and compensation issue to become a reality

India Infoline News Service | Mumbai | January 03, 2017 21:36 IST

Demonetisation has led to reduction in revenues for states, by 30-40% and with GST implementation the states' revenues are expected to come down further. Thus there will be several state finance ministers demanding for appropriate compensation.

By now it is clear that the dual control issue is what is stalling the progress on the GST front, apart from the new demand for compensation, emanating from several states.

“Many states will need compensation and the question is when the states will need compensation to the tune of Rs 80000-90000 crore as against the previously suggested Rs 55,000 crore, where will the money come from is a question", said Dr. Amit Mitra, Finance Minister of West Bengal while talking to media. 

Demonetisation has changed the whole equation of compensation according to the finance ministers who attended the GST council meet today.

Demonetisation has led to reduction in revenues for states, by 30-40% and with GST implementation the states' revenues are expected to come down further. Thus there will be several state finance ministers demanding for appropriate compensation.

Now it is clear that the April 1 deadline is highly unlikely. With September 2017 being the deadline, a consensus needs to be in place much before the last date, so that there is smooth implementation.

July 2017 has become the most probable date when the GST will be a reality in India.

Apart from the dual control issue and the compensation issue, the other two issues that were discussed are:
  1. More items to be included in the list of demerit goods
  2. Lack of clarity over territorial waters as IGST puts the taxes collected from territorial waters in the centre’s kitty.
 
In tomorrow’s meet the issue of dual control is expected to be discussed even as states stick to their demand for control below the 1.5 crore threshold.
 

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