By TIOL News Service

NEW DELHI, DEC 04, 2016: EVEN as the stalemate continues over the three key contentious issues gripping the GST Council, the shadow of demonetisation of high value currency notes has further complicated the growing tradition of deliberative democracy. Even after two days of intense deliberations the Council members failed to reach any consensus.

However, as per the Union Finance Minister, Mr Arun Jaitley, the Council discussed as many as NINE Chapters of the Model GST laws, in fact clause by clause, and finalised the same. The rest are going to be debated at its next meeting scheduled for December 11 & 12. Although the common perception among the industry and trade was that once the technical committee consisting VAT Commissioners and the CBEC officials had approved the Model Laws, there would be very little for the Council to discuss but several States have very strong propensity to raise even techncial issues again and again and that is why the Council had to devote a major chunk of its time at this meeting to deliberate and take approval chapter-wise. Since expediting the approval for the Model Law is the top priority of the Centre as it aims to at least table the Bill towards the fag end of the Winter Session of Parliament, it cooperated and agreed to discuss all disputed provisions.

Even as the debate was being held over the model laws, some of the States preferred to discuss the fall-out of demonetisation on the GST roll-out. Since the GST Council's mandate is not to go beyond GST, the Chair declined to allow any debate over it. However, after the meeting, Mr Jaitley did invite the disgruntled Members and heard them. Their major fear was that since the payment cycle has been disrupted and the economy is going to contract because of demonetisation, it may impact their revenue collections in the remaining two quarters. In this background, they demanded postponement of the proposal roll-out of GST by at least three months and also called for easing of their FRBM obligations. While Mr Jailey agreed to consider the easing of FRBM obligations but did not agree with them that the demonetisation would hurt the growth path.

The other two issues which were also debated again and are going to be discussed further at the next meeting were the issues of CESS and cross-empowernment. Since the Centre is not sure of mopping up the desired quantum of revenue which is going to be enough for compensation to the States, a solution was to be found by the Council so that extra burden does not fall on the Centre. Secondly, the issue of cross-empowerment continues to be an emotive bone of contention as several States feel that they have the first right to tax them and the Centre should keep its hands off them. They continued to insist on the horizonal divide formula but the Centre has proposed vertical split as a solution.