Finally, Centre States agree on new tax regime

New Delhi: In a last-minute compromise deal, the Centre on Monday night decided to keep petroleum out of the proposed Goods and Services Tax. In return, the states have agreed to entry tax being subsumed in the new tax regime proposed from April 2016.

On the issue of compensation to states for revenue loss because of subsuming of all indirect taxes in the GST, the Finance Ministry will seek legal opinion on how it can be accommodated in the Constitution Amendment Bill that it wants to bring in the ongoing winter session of Parliament.

A compromise was reached after an over hour-long meeting between Finance Minister Arun Jaitley and Finance Ministers of seven states, including Punjab, Haryana, Gujarat, Tamil Nadu, Maharashtra, Karnataka, and Jammu and Kashmir.

Concerns of other states have already been addressed.

Talks between the Centre and the states over GST framework were deadlocked last week over entry tax and VAT on petroleum products being included in the GST regime. States, which earn over 50 per cent of their revenue from taxes on petrol and other petro products, wanted it to be kept out of GST, so that they could continue levying different tax rates on these products. States also wanted the compensation to be included in the Constitution Amendment Bill in the three rounds of talks that were held last week.

The GST has been hanging in balance for about seven years now. The breaking of the stalemate would pave the way for introduction of the GST Constitution Amendment Bill in the current session of Parliament. The Cabinet has to first ratify the Bill.

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