GST Bill: The sticky points and what is possible

All hopes are pinned on this monsoon session of Parliament for the passage of the much-delayed Goods and Services Tax ( GST) law with the government and Congress trying to find a middle ground.

ET looks at the sticking points and what is possible.

1 per cent Tax on interstate movement of goods
Proposed to compensate manufacturing states such as Tamil Nadu for potential loss of revenue.

Congress Demand
Rightly demanded tax be dropped as it will create distortions.

Government Stand Willing to let go; ready to compensate manufacturing states which wanted this tax.

Dispute settlement mechanism
The proposed structure provides that the Centre and states settle dispute through the GST council. The voting structure ensures no side has undue powers.

Congress demand Independent dispute: settlement mechanism.

Government stand
GST council should decide it; most states are also in favour.



GST RATE
This is the most contentious issue.

Congress demand
Put a cap on the tax rate in the Constitution itself.

Government stand
Government rightly not elenting on this; it will make the law rigid and difficult to change quickly.
Government may be open to keeping it in the GST law.



POSSIBLE TIE-BREAKERS
Agree to GST rate in constitution
The limit is set in Constitution but so high that it is meaningless and gives government flexibility For instance, a rate of 25 per cent.

Put the rate in GST law
This should satisfy Congress as change in GST rate will still not be easy.

Changes in rate will need to be approved by the GST council.

Rate would also have to be changed in the state GST laws as well.
Prescribe a band
Agree to a band of rate of GST that can be changed through notification with an appropriate ceiling.

This is the best case scenario.