States have the last laugh on GST, says Thomas Isaac

Thiruvananthapuram: Finance minister Dr T M Thomas Isaac said that the states have had the last laugh after the preparatory negotiations for the roll out of goods and services tax (GST). He said that most of the demands made by the states have been accepted after nine GST council meetings.  Dr Isaac, like union finance minister Arun Jaitley, is confident that GST would come into force by July 1.  “We could enhance the powers of the state in the implementation of GST,” Dr Isaac said.

At the start of the negotiations, the Centre had stated that it would collect both the service tax and Integrated GST. The rest, the Centre had said, would be shared by both Centre and states. “Eventually, after nine GST council meetings, it has been decided that both Centre and states would together share both IGST and services tax. And as for the rest, like it was decided before, will be shared by both,” the finance minister said. What’s more, the administrative control over traders with turnover of Rs 1.5 crore or less has also been ceded to the states.

The centre will have claim only on 10 percent of this revenue. By reducing the GST on essential goods, Dr Isaac said that the GST law had been rendered more egalitarian. “Our biggest argument was that any increase in the tax on essential goods will lead to a reduction in the tax on luxury goods. This has now been accepted,” Dr Isaac said. The tax on essential goods has been brought down to 5 percent. There is no tax on agricultural products either. The tax on luxury goods has been raised to 28 percent. Besides, a cess will also be imposed on such goods, which at a later date will be dissolved in GST.

All along the Centre was staunchly against state rights over commerce in territorial waters. “Now, it has been decided that the states will have rights over the economic activity in these waters as has been the convention,” Isaac said. Further, the Centre has agreed to compensate the states for full five years. “The transfer arrangement has been made part of the GST law, ensuring that issues that had cropped up during the initial phase of VAT implementation did not recur,” the minister said.