Further, the idea of a Dispute Settlement Authority (DSA) would be shelved now. The GST Council would be empowered to decide about disputes. However, it would be difficult for the GST Council to handle the inter-state or Centre-state disputes on GST, which in course of time, are likely to increase exponentially. The Council would have to set up a forum for resolving such disputes. Further, the Centre has agreed to set a floor rate for the tax with a narrow band within which the States will retain the right to vary the Sate GST (SGST).

Different SGST rates at different states will complicate input tax credit scheme, and it might also encourage cross-shopping. True, more than 50% of the countries administering VAT/GST, including countries in European Union do have multiple rates. But they are also facing difficulty, the worst case being that of Brazil. If we opt for multiple rates of SGST in different states, the scheme of Integrated GST (IGST) for inter-state movement of goods will have to be reworked carefully.

My major apprehension relates to the proposal to give flexibility to the states to join or exit GST on the ground that the states had similar option while implementing VAT. But GST is quite different from VAT in structure as well as in its administration. GST intends to create a common economic market for the entire country. There will always be inter-state movement of goods and services, taxation of which would be destination-based.

If one state refuses to adopt GST, how will the taxman compute the tax for the goods & services destined for or moving out of that state? Further, would Central GST be leviable in non-GST states? What would be the fate of CST and Service Tax in non-GST States? Will non-GST states have voting right in the GST Council? These issues did not arise while implementing VAT because VAT was an internal tax on sale of goods in a particular state. The inter-state movement of goods were covered by CST. Therefore, VAT could be implemented by one state after another. But GST surely has to be ushered in together by all the states and the Centre.

One welcome decision of Bhubaneswar Meet is the future prospect of bringing crude and petroleum products within the ambit of GST.

The present Constitutional Amendment Bill contains a clause excluding these items. It has now been agreed that these would not be excluded, constitutionally. Denial of input tax credit for these essential industrial inputs by keeping them outside GST would bring distortion in GST structure. This positive step will have to be further pursued to keep these items within GST. The same economic sense should compel bringing of alcohol in the GST net, as has been decided for tobacco.

The EC also approved the report of a sub-committee set up by Union Finance Minister P Chidambaram on “GST Design”. The report recommends lot of follow-up action for enabling finalisation of GST design. Three panels have therefore been formed for addressing following pending issues: (i) Integrated GST for inter-state movement of goods & services and VAT on imports, (ii) Revenue Neutral Rates (RNR) and Place of Supply Rules, (iii) Thresshold for the tax and Dual Control for small traders.

On inter-state movement of goods and services, a new model dealing with only the state GST aspects of inter-state transaction is being examined. On RNR, a report prepared by R. Kavita Rao of National Institute of Public Finance and Policy which brings out state wise analysis of revenue implications of GST and estimation of RNR would help the new panel.

The issue of threshold and dual control for small traders arises from the fact that currently there are varying thresholds based on the annual turnover, for determining the incidence of different taxes like Central Excise duty, Service Tax and VAT. It is good economics to suggest that in the GST regime, the taxes of both the Centre and states should have a common incidence and hence common threshold. Varying thresholds would disturb the tax base and hence the RNR, which would ultimately effect the rate of GST. Smaller the tax base, higher would be the RNR.

Therefore, threshold has to be common. On the question of dual control over the small traders on whom currently only the States have control, one view is that the states may be authorised to collect even the Central GST for the taxpayers below the present threshold of Rs 1.5 crore, so as to avoid dual control.

However, this won’t be a wise move. Keeping them out of the radar of Central GST authorities altogether would be fraught with imbalance in compliance and revenue risk like issuance of fake invoices for unlawful availment of tax credit etc.

The solution lies in administering GST with robust IT support. That’s why GST Network (GSTN) has been envisaged to provide IT support for business processes like e-registration, e- filing of returns, e-payment and computer aided cheques. This will significantly reduce physical interface with taxpayers.

Further, compliance requirements like audit, inspection etc may be minimised for such small tax-payers through administrative directions. Besides, it is not the small traders alone. The small service tax payers who are currently under control of only Centre would also come under the dual control of states and the Centre. Therefore the answer lies in minimising the dual role for small taxpayers and not in doing away with it.

Thus, the road ahead is still bumpy. But the current breakthrough at the Bhubaneswar meet has shown some rays of light at the end of the long tunnel. The Centre and states need to start aligning their business processes immediately. GST is a good idea, and no one can stop its progress. But it would be wise not to fix a hasty target for its implementation. After all, the introduction of GST would be as much a political decision as an economic one.

The author is Indirect Tax Ombudsman, Delhi, and former Chairman, Central Board of Excise & Customs. Views are personal