The Finance Standing Committee of Parliament has pulled up the Centre for not drafting the 115th Constitutional (Amendment) Bill on Goods and Services Tax (GST) carefully.
The panel, which will adopt the report soon, said ideally the Bill should not include specific aspects relating to rates, exemptions, exclusions, thresholds, administrative arrangements etc.
Though the committee did not adopt the draft report in its meeting on Friday, the lack of consensus among political parties may delay the implementation of GST regime further.
“What should be included in the laws and rules should not form part of the Constitution,” the panel, headed by veteran Bharatiya Janata Party leader Yashwant Sinha said in the draft report.
The panel has also recommended several amendments to the Bill. The draft report said the Centre and States should arrive at a broad consensus on issues concerning the implementation and design of GST.
“A fine balance is therefore required to be maintained between the imperatives of a common market with unified tax structure vis-à-vis the fiscal requirements of States,” it said, adding that tax reform measures like GST hinge on mutual trust and co-operation between the Centre and State Governments.
It urged the Centre to carry out a credible study to evaluate the impact of GST on State revenues.
The Committee also suggested that a well-defined automatic compensation mechanism be created within the GST regime. It said a GST Compensation Fund may be created under the administrative control of the GST Council for the purpose.
The panel was against the proposed provision of GST Dispute Settlement Authority and said that such an authority would affect the fiscal powers of Parliament and the State Legislatures.
The Committee said entry tax in general should be subsumed in GST. It asked the Centre to modify the Bill to empower the States to collect entry tax for distribution to local bodies instead of leaving it to be collected by various local bodies.
Keeping in mind the autonomy of States, the panel said there could be a floor rate and a ceiling within which the States will have the freedom to have a high or a low GST rate.
“The threshold of limits of turnover etc. for exempting certain class of taxpayers like small traders, manufacturers and service-providers may also be left to the wisdom of the GST Council,” it said.
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